Orders for Aramco bond issue top record US$100b
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Orders for Saudi Aramco’s debut international bond topped US$100 billion yesterday, a record-breaking vote of market confidence for the oil giant which has faced investor concerns about government influence over the company.
State-owned Aramco is expected to raise more than US$10 billion from the deal.
The bond issue is seen as a gauge of potential investor interest in the Saudi company’s eventual initial public offering.
Before the six-part bond deal was marketed on Monday, Saudi Energy Minister Khalid al-Falih said initial indications of interest for the paper were over US$30 billion.
Demand appeared to be the largest ever for emerging markets bonds, fund managers said, surpassing orderbook value of more than US$52 billion for Qatar’s US$12 billion deal last year, US$67 billion for Saudi Arabia’s inaugural issue in 2016 and US$69 billion orders for Argentina’s US$16.5 billion trade that year.
“Purely on figures, it is a fantastic credit,” said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital.
“The thing is, they are part of Saudi Arabia, they are a government arm.
“For equity investors this is always going to be an issue, more so than for bond investors.”
The Aramco bond has attracted interest from a wide range of investors, as the oil producer’s vast profits would put its debt rating — if unconstrained by its sovereign links — in the same league as independent oil majors such as Exxon Mobil and Shell.
But for some investors, Riyadh’s control over the oil giant is an issue as its state ownership means decisions will ultimately be for the benefit of the government rather than investors.
“Aramco is more transparent, has stronger credit metrics and is on an improving ESG (environmental, social and governance) trajectory whereas the government is more complex,” said Mohieddine Kronfol, chief investment officer of Global Sukuk and MENA Fixed Income at Franklin Templeton Investments.
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