Saudi Aramco forced to sell billions of dollars in bonds

The Covid-19 pandemic has dramatically hit global demand for oil this year, leaving the company’s debt levels spiralling

Saudi Aramco is to sell billions of dollars in international bonds in a bid to bolster its balance sheet and meet its $75bn dividend target, as the coronavirus crisis hits its profits. 

The oil giant made its debut in the international debt markets last year by raising $12bn, after receiving more than $1oobn in orders.

Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley and NCB Capital were hired to arrange investor calls starting on Monday for several tranches of potential bonds with maturities of between three and 50 years, Saudi Aramco said in a bourse filing.

It did not specify how large the issuance would be, but it is expected to run into the billions with benchmark bonds generally at least $500m per tranche.

Other institutions involved in the deal include BNP Paribas, BOC International, BofA Securities, Credit Agricole, First Abu Dhabi Bank, Mizuho, MUFG, SMBC Nikko and Societe Generale, a document issued by one of the banks on the deal showed.

Saudi Aramco, whose flotation in December 2019 was the world’s biggest IPO, earlier this month reported a 45 percent drop in third-quarter net income to $11.8bn.

The coronavirus pandemic has dramatically hit demand for oil this year, leaving the company’s debt levels spiralling. 

The upcoming bond issue is designed to fill a financial gap after the disastrous year.

Despite its difficulties, Saudi Aramco has maintained its commitment to pay out the $75bn annual dividend to investors this year, almost all of which will go to its largest shareholder, the Saudi government.

Meanwhile, Saudi Aramco is under growing pressure to cut its spending and raise cash to help buffer the kingdom, which faces a ballooning budget deficit.

The company has cut capital expenditure by an estimated $25bn to $30bn this year.

Last week, rating agency Fitch lowered the outlook on Saudi Aramco from positive to negative