April 09, 2019, 17:46 / Business / News

Demand for Saudi Aramco bonds exceeds $100 billion

Investor orders for the purchase of Saudi Aramco's debut Eurobonds have already reached $100 billion, reports the Financial Times. Placement is due on Tuesday 9 April. Earlier it was reported that the organizers of the issue intend to raise at least $10 billion.

Saudi Aramco plans to issue six types of bonds with maturities ranging from three to 30 years. It is expected that their yields will be approximately equal to the yields of similar Saudi sovereign bonds. At the same time, the demand for Saudi Aramco bonds turned out to be even higher than for government bonds when the country first entered the international debt market in 2016. At that time, investors placed orders for $67 billion.

They are now particularly interested in 20- and 30-year bonds because they consider their yields relatively attractive, the FT writes, citing a banker familiar with the details of the issue. Amid the Saudi Aramco frenzy, the yield on 20-year Saudi government bonds fell about 0.2 percentage points to 4.58%. Bond yields fall when their prices rise.

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Saudi Aramco was originally going to hold an IPO. Authorities had hoped that the company could be valued at $2 trillion. However, the IPO had to be postponed and is unlikely to take place before 2021. Ahead of the bond offering, Saudi Aramco revealed its financial results for the first time. Its net profit at the end of last year grew by 46.3% to $111.1 billion on revenue of $355.9 billion. Thus, it is the most profitable company in the world. According to Saudi Aramco, it does not need borrowed funds and the bond issue is not related to its purchase of the petrochemical company Sabic for $69 billion. Many observers believe that this is how the company wants to establish ties with international investors, writes Reuters.

High demand indicates investor interest in Saudi financial assets, despite the murder of journalist and dissident Jamal Khashkogi at the Saudi consulate in Istanbul in October 2018. Following this scandal, some foreign businessmen abandoned joint projects with the kingdom.