Saudi Aramco Completes $6 Billion International Bond Issuance, Its First in Three Years

Saudi Aramco, the world's biggest oil-producing company, has completed a $6 billion international bond issuance — its first return to the debt market in three years — in a transaction that attracted orders worth more than $33 billion at its peak and was upsized from an initial $5 billion target, the company announced on Thursday, July 18, 2024, in a statement to the Saudi stock exchange Tadawul.

A three-tranche return to the debt market

The US dollar-denominated senior unsecured notes were sold under Aramco's Global Medium Term Note Programme. The offering began on July 9, 2024 and was priced on July 10, 2024; the notes are listed on the London Stock Exchange. The deal comprised three tranches of $2 billion each with maturities of 10, 30 and 40 years, expected to provide yields of 5.25%, 5.75% and 5.87% respectively.

• Issue size: $6 billion, increased from an initial $5 billion target after a strong investor response.
• Order book: more than six times oversubscribed against the initial target, exceeding $33 billion at its peak.
• Pricing: all three tranches were favourably priced with a negative new issue premium — the extra spread investors are paid for buying a company's new issue relative to its existing bonds.
• Minimum subscription: $200,000.
• Legal framework: Rule 144A/Reg S offering requirements under the US Securities Act of 1933, as amended, with compliance with the stabilization rules of the Financial Conduct Authority and the International Capital Market Association.
• Redemption options: the issuer's call, maturity par call and make-whole call at maturity, upon an event of default or for tax reasons.

"Fortress balance sheet": the company's own words

Ziad Al-Murshed (Ziad T. Al-Murshed), Aramco's Executive Vice President of Finance and Chief Financial Officer, said: "We are pleased with the strong interest and level of engagement from investors globally, both existing and new. Our order book exceeded $33 billion at its peak, reflecting Aramco's exceptional financial resilience and fortress balance sheet."

"Achieving a negative issue premium across all tranches is a testament to our unique credit proposition. We have consistently demonstrated our financial discipline, while delivering on shareholder value and business growth, and we aim to maintain a strong investment-grade credit rating across business cycles," he added.

The company said the transaction generated strong demand from a diverse base of investment-grade focused institutional investors, and that the negative issue premium across all tranches reflects the strength of Aramco's credit profile.

A regular issuer after a three-year pause

Aramco is a regular bond issuer: it first tapped the international market in 2019, followed by a 50-year bond offering in 2020. Its previous debt market appearance was in 2021, when it raised $6 billion from international investors through a three-tranche sukuk, also known as an Islamic bond. In February 2024, Al-Murshed had signalled that the company could issue longer-term bonds of up to 50 years and might come to market "likely in 2024" as conditions improved, saying the company was "always prioritizing longer term over short term".

The 2024 capital markets context

• January 2024: Saudi Arabia itself issued $12 billion in dollar-denominated bonds as regional issuers leveraged debt markets amid declining global interest rates.
• May 2024: Fitch Ratings projected that GCC debt capital market issuances would keep rising through 2024 and 2025, steadily approaching $1 trillion in aggregate outstanding amount.
• May 2024: Aramco said it expects to pay $31 billion in dividends to the Saudi government and its shareholders despite reporting a lower first-quarter profit on softer oil prices.
• June 2024: Aramco sold 1.55 billion shares, 0.64% of its issued shares, in its second public offering, a sale worth more than $10 billion that ultimately generated $12.35 billion in proceeds for Riyadh.

The company sits at the heart of the kingdom's cash flow plans as the Arab world's biggest economy continues to pursue its economic diversification agenda, and the bond deal is the latest among corporate, sovereign and quasi-sovereign issuers in the six-member GCC bloc tapping bond markets to extend maturities, repay existing debt and fund new projects.

Company and contacts

Saudi Aramco — the world's biggest oil-producing company and the kingdom's state oil firm, a regular issuer in international debt capital markets and the centre of Saudi Arabia's cash flow and diversification plans.

Contacts: the sources attribute the announcement to Ziad Al-Murshed (Ziad T. Al-Murshed), Executive Vice President of Finance and Chief Financial Officer, quoted above; the articles carry no direct company phone or e-mail contacts.

Website: https://www.aramco.com/