MOSCOW (MRC) -- Saudi Aramco is set to raise USD12 billion with its first international bond issue after receiving more than USD100 billion in orders, a record breaking vote of market confidence for the oil giant which has faced investor concerns about government influence over the company, said Hydrocarbonprocessing.
State-owned Aramco's bond issue, split into maturities ranging from three to 30 years, is seen as a gauge of potential investor interest in the Saudi company's eventual initial public offering. Before the bond deal was marketed on Monday, Saudi Energy Minister Khalid al-Falih said initial indications of interest for the paper were over USD30 billion.
Having swelled to over USD100 billion during the sale process, demand appeared to be the largest ever for emerging markets bonds, fund managers said, surpassing orderbook value of more than USD52 billion for Qatar's USD12 billion deal last year, USD67 billion for Saudi Arabia's inaugural issue in 2016 and USD69 billion orders for Argentina's USD16.5 billion trade that year.
Such strong interest was also the latest sign that international investors are pouring money back into Saudi Arabia, as the kingdom tries to move on from the murder of Saudi journalist Jamal Khashoggi after his killing at the hands of Saudi agents in October strained ties with Western allies. "Purely on figures, it is a fantastic credit," said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital.
But he added: "The thing is, they are part of Saudi Arabia, they are a government arm. For equity investors this is always going to be an issue, more so than for bond investors." The Aramco issue has attracted interest from a wide range of investors, as the oil producer's vast profits would put its debt rating - if unconstrained by its sovereign links - in the same league as independent oil majors like Exxon Mobil and Shell.
Aramco has insisted on its independence while meeting investors ahead of the bond issue last week, saying the Saudi government remained committed to Aramco's governance framework to safeguard its independence even when oil prices dropped.
But for some investors Riyadh's control over the oil giant is an issue as its state ownership means decisions will ultimately be for the benefit of the government rather than investors.
As MRC informed earlier, demand for Saudi Aramco's inaugural international bond, seen as a gauge of potential investor interest in the oil company's eventual initial public offering, is higher than USD30 billion