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Aramco has lined up a roster of international investment banks supporting its jumbo bond deal, which suggests the mood around dealing with Saudi Arabia is changing as the impact of the Khashoggi crisis ebbs. The banks not only want to participate on the bond sale, but also ensure they’re well placed in case the kingdom goes ahead with an initial public offering for Aramco.
Jamie Dimon, JPMorgan Chase & Co.’s chief executive officer, spoke at a lunch in New York Thursday to market the deal, according to one person familiar with the matter, a rare appearance that underlines the bond sale’s significance for Wall Street. Last year, Dimon and others skipped a global business conference in Riyadh, which had been dubbed the ‘ Davos in the Desert.’
Foreign Investment
This isn’t the first time Saudi Arabia has turned to debt markets since the death of Khashoggi. In January, the nation sold $7.5 billion in international bonds, showing that the outcry hasn’t stifled foreign investment in the country.
JPMorgan and Morgan Stanley are managing the bond sale along with Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, and NCB Capital Co.
The bond sale, being pitched to investors over the last week in a global roadshow from Tokyo to New York and London, has forced Aramco to reveal financial secrets held closely since the company’s nationalization in the late 1970s, casting a light on the relationship between the kingdom and its most important asset. Both Fitch Ratings and Moody’s Investors Service assigned Aramco the fifth-highest investment-grade rating, the same as Saudi sovereign debt, but lower than oil majors Exxon Mobil Corp., Royal Dutch Shell Plc and Chevron Corp.
The state-owned company generated the most profit of any corporation in the world in 2018 with income of $111.1 billion -- more than Apple Inc., Google’s parent Alphabet Inc. and Exxon Mobil Corp. combined. But accounts published before the firm’s debut in the international bond market also show Aramco -- an organization that produces about 10 percent of the world’s crude -- doesn’t generate as much cash per barrel as other leading oil companies like Shell because of a heavy tax burden.
Further reading on the Saudi state oil company: Aramco Reveals Sharp Output Decline at Super-Giant Oil Field Aramco Pumps Oil at Fraction of Rivals’ Costs and Way More of It Aramco’s Accounts Show $2 Trillion Valuation Is a Challenge Aramco’s Got So Much Cash It Won’t Mind Spending $69 Billion Aramco Unveils Financial Secrets of World’s Most Profitable Firm
Aramco is raising money as bond investors search for higher yields. Emerging-market bond sales have made a record-breaking start to the year, with issuance among all currencies already climbing above $600 billion, according to Bloomberg league table data.
The company plans to use some of the proceeds of the bond sale to pay for the $69 billion acquisition of a majority stake in local petrochemical company Sabic from the country’s sovereign wealth fund. The deal between three government-owned entities -- where the kingdom’s sovereign wealth fund sells its 70 percent stake in Sabic to Aramco -- moves money from one pocket of the state to another.
This article provided by Bloomberg News.