Coverage: Saudi Aramco raises $12 billion in massive bond sale

Saudi Aramco raised $12 billion in its debut international bond Tuesday, an issuance that sparked massive interest among investors eager to access the world’s most profitable company.

Rory Jones, Summer Said and Avantika Chilkoti of The Wall Street Journal had the news:

Government-owned Aramco, known officially as Saudi Arabian Oil Co., received more than $100 billion in orders for its bond and had been expected to raise about $10 billion from the sale. Saudi officials are likely to view the large investor interest as a positive bellwether for the oil giant’s potential initial public offering, which is expected in 2021.

“I think this is a prelude to listing,” said Conrad Saldanha, equity portfolio manager at Neuberger Berman Group LLC. “This is the biggest oil-production firm in the world. It looks interesting in that respect.”

The company is bigger and more profitable than Apple Inc., Alphabet Inc. and Amazon.com Inc. combined. The oil firm’s disclosure of its books via the bond sale is the first step toward a potential public listing.

Javier Blas, Archana Narayanan and Lyubov Pronina of Bloomberg News reported that the sale helps the Saudi royal family:

The bond sale is largely seen as Plan B to raise money for the kingdom’s economic agenda after the initial public offering of Aramco was postponed until at least 2021 from an initial 2018 target. In effect, Saudi Crown Prince Mohammed bin Salman, who runs the country day-to-day, is using the state oil producer’s pristine balance sheet to finance his ambitions.

For Saudi Arabia, the strong demand for the debt of its state oil company will comfort the country’s wealthy royal family, which has been in crisis mode since the assassination of journalist Jamal Khashoggi in October. The murder, which U.S. intelligence concluded was ordered by Prince Mohammed himself, triggered a global uproar that prompted Wall Street banks, investors and business tycoons to give the kingdom a cold shoulder.

An investment summit in Riyadh that month dubbed “Davos in the Desert” was mostly boycotted by its A-list participants. Yet, little by little, the power of money has attracted Wall Street again, first at the real World Economic Forum in Davos, Switzerland, where bank bosses said it was time to let the kingdom out of the penalty box. And later in the bond market itself, where the Saudi government successfully raised debt this year.

Zahraa Alkhalisi of CNN Business reported that demand for the bonds topped $100 billion:

Saudi Aramco tapped international debt markets for the first time ever Tuesday, and demand for the bonds soared above $100 billion, according to a person familiar with the transaction.

The bond issue will raise at least $10 billion for Aramco, the world’s most profitable company. A spokesman for Aramco declined to comment.

In such large transactions, where strong demand is expected, investors often inflate their orders to ensure they’re allocated at least some of the securities.

Saudi Arabia was planning to sell some shares in Aramco last year to raise money for the kingdom’s economic transformation, but the IPO stalled. A lack of transparency over the size of the country’s energy reserves had caused skepticism about the potential sale and the value of Aramco.

Since then, Saudi Arabia’s vast energy reserves have been independently audited and shown to total 268.5 billion barrels. That estimate is slightly higher than the 266.3 billion barrel figure previously published by the Saudi government.