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Saudi Aramco's first international bond auction attracted $ 85 billion in investor orders, confirming the rapid rehabilitation of Saudi capital's financial markets following the outcry over Jamal's death. Khashoggi last year.
The Saudi-backed oil producer – which revealed last week that it was the world's most profitable company – has opened the sale of six-part bonds to investor orders on Monday . At this point, he had already received more than 30 billion USD of interest guidance at a series of investor meetings in Europe, Asia and the United States, ie three more than the expected 10 billion USD.
On Tuesday morning, the backlog had reached $ 85 billion, a potential record for a bond sale in emerging markets, exceeding the $ 67 billion demand that Saudi Arabia itself has seen. in its extremely popular debut on the bond market in 2016. The backlog is also close to some of the largest, even in developed market debt transactions. Six years ago, the US telecommunications company Verizon had recorded $ 100 billion worth of orders for a record $ 49 billion worth of corporate bonds.
The sale of bonds is closely linked to the vision of Saudi Crown Prince Mohammed bin Salman to open up the economy of the desert kingdom to the rest of the world, after his biggest project of listing a stake in Aramco on the stock markets has failed. Neither the banks nor the investors were dissuaded from taking part in this high-profile agreement despite the protests provoked by the death of journalist Mr. Khashoggi at the Istanbul consulate in Istanbul. last year. A conference in Riyadh in October, dubbed "Davos in the Desert," was boycotted by several business figures, including Jamie Dimon, head of JPMorgan Chase, who now heads the Aramco bond auction.
An investor following the transaction stated that the flow of demand reflected the "scarcity value" of the bonds. The Treasurer of Saudi Aramco told investors that the company did not need to raise funds because of its "fortress-like corporate position" and was only focused on opening for the first time the historically secretive group to investors public.
The state-backed Saudi oil company is marketing the new bonds at a price comparable to that of Saudi government bonds. As borrowers generally seek to tighten prices before the close of a bond sale, this suggests that Aramco is targeting a cheaper cost of borrowing than the Saudi government.
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This would be very unusual, given the close links between the oil producer and the Saudi state. But Aramco could still succeed because it has attracted demand from US fund managers investing in high-quality corporate bonds. The yields offered are well above those of the major US oil producers, such as ExxonMobil and Chevron.
While rating agencies rate Aramco at the same level as the Saudi government, in the single A range, the oil company told investors that Moody's would award it a triple A rating of prime, if it was a corporation autonomous, because it would produce enough cash every year to cover its debt several times.
A banker close to the bond issue said the orders were geared towards longer tranches of the deal, with Aramco offering investors the option of buying bonds at 20 and 30 years with higher yields. Strong demand for the Aramco deal also resulted in a sharp drop in Saudi government bond yields over the past week, which led to higher prices. The yield on the country's 30-year US dollar bonds dropped by about 20 basis points to 4.58%.
The Aramco deal is expected to close on Tuesday with the closing of European investors' order books at 11 am London time.
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