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LONDON – Last week, the heads of Saudi Aramco, the giant oil company of Saudi Arabia, presented potential investors with the company's first international bond offering.
In central London, investors crowded into a room of the Corinthia Hotel to hear the details of the operation. In New York, Jamie Dimon, general manager of JPMorgan Chase, made a rare appearance to talk about bond sales.
All indications are that investors are eager to acquire a share of Aramco, despite concerns about the extent to which its wealth is tied to its owner, the Saudi government, and Crown Prince Mohammed bin Salman.
Prince Mohammed's ties to the murder of a prominent journalist and dissident, Jamal Khashoggi, provoked a storm among politicians and members of the media. Yet the demand for Aramco bonds has exceeded $ 60 billion, said a person informed of the case who refused to be identified because he was not allowed to speak in public, far exceeding the initial goal of the company to sell about $ 10 billion of debt. The bankers of the company should set the price of their bonds Tuesday.
The sale of bonds will help fund Aramco's US $ 69 billion purchase from Saudi-controlled Saudi Petrochemical Corporation Saudi Basic Industries Corporation. The deal will eventually generate funds for the country's sovereign wealth fund, which holds a majority stake in Sabic, the name of the chemicals company.
Since at least 2016, Prince Mohammed, de facto ruler of the kingdom, has big plans for Aramco, the country's economic jewel, rich in oil. He wants to invest huge sums in western technology companies such as Uber, as part of his efforts to clear the Saudi economy of its dependence on oil.
Yet Saudi Arabia's oil wealth is the only realistic source of funding for this transition.
When his initial project to make public Aramco Difficult last year, Prince Mohammed turned to the Sabic agreement as an alternative way of raising funds. But Aramco officials said the bid was only postponed, not canceled and could still take place.
If so, recent meetings with investors may be a kind of dress rehearsal. Intense and long preparation of I.P.O. helped make the sale of bonds possible. At one point, about 60 bankers and other professionals were occupying a floor at Aramco's head office in Dhahran, preparing the oil giant's crude figures for reports that could be shown to potential investors and addressing unresolved issues, advising them who worked on the transaction.
The sale of bonds is under close scrutiny, particularly because of the cloud that has plagued Saudi Arabia since the assassination of Mr. Khashoggi at the Saudi Arabian consulate in Saudi Arabia. Istanbul last year. US and other Western intelligence agencies have concluded that the Crown Prince ordered the murder.
But this controversy has not scared big banks like JPMorgan Chase and Morgan Stanley, who are leading the supply, and other banks in supportive roles. JPMorgan and Morgan Stanley declined to comment.
"To the extent that Mohammed bin Salman has become persona non grata in the West, Saudi Arabia is not persona non grata," said Chas W. Freeman Jr., former US ambassador to Riyadh .
In early April, Aramco published a prospectus stating that it was the most profitable company in the world in 2018, with a net profit of $ 111 billion and a very small debt. Moody's Investors Service analysts have rated the company's credit rating as excellent as that of the Saudi government. If Aramco had been an independent company, it would have gotten a higher rating, said Moody's.
This made the bond very attractive to investors.
"The more a person does not need money, the more we want to give it to him," said Reza Karim, assistant fund manager for emerging debt at Jupiter Asset Management.
Some analysts have stated that the history of Aramco – it was founded by Standard Oil of California – and that its reputation as a Western-style company in a resolutely conservative realm made it attractive to international investors.
Its enclaves in the eastern part of the country – where American geologists discovered oil in the 1930s – resemble the American suburbs, with its baseball fields, cinemas and themed restaurants. In these isolated areas, women do not have headgear and hold important positions in fields such as computer and geology within the company.
"Many people and institutions have a very positive view of Aramco's leadership," said Helima Croft, an analyst at RBC Capital Markets. "They see it as a center of enlightenment and progress in Saudi Arabia."
However, there is a fear, both inside and outside of society, that Operation Sabic, as well as a possible Ip.O., may foreshadow a new intervention by the Crown Prince and his associates. For most of the company's history, the royal family had largely left Aramco's operations to a succession of professional managers. But the danger of a royal intervention has increased, according to analysts, because the Crown Prince and his father, King Salman, no longer direct the country by consensus, unlike their predecessors.
According to Jim Krane, an expert on the Persian Gulf at the Baker Institute for Public Policy at Rice University, Saudi leaders seem ready to tinker with Aramco.
"I see this as a process of realigning Aramco and the kingdom to face an uncertain future for oil, rather than a political raid on the kingdom's cash cow," he said.
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