US-based leading global energy investor EIG will lead a yet-to-be-named consortium to issue billions of dollars in bonds across two or three transactions to replace bank debt funding a Saudi Aramco oil pipeline asset investment.
According to the sources, the Washington DC-based firm’s consortium will issue bonds to replace $10.5 billion in “staple financing” negotiated by Aramco for potential suitors to take a 49 percent stake.
The $12.4 billion agreement gives the EIG-led group a stake in Aramco Oil Pipelines, which has 25 years of tariff payments rights for oil transported through Aramco’s oil pipeline network that runs through the world’s largest crude exporter.
The deal’s staple financing had a five-year maturity with a one-year extension option. EIG plans to replace the entire amount with long-term bonds throughout two or three bond deals.
According to the sources, the first bond will be issued in the first quarter of next year, and the entire refinancing will be completed in two years. The $12.4 billion transactions had $1.9 billion in equity and the rest was the staple financing.
The sources added that EIG is in talks to sell a part of the equity portion to investors such as Abu Dhabi state fund Mubadala, Chinese investors, Saudi Arabian and UAE pension funds, and a small portion to US pension funds. Mubadala has said that it is looking at the deal.
The transaction is expected to close soon, subject to customary closing conditions, including any necessary merger control and relevant regulatory approvals, according to EIG.
EIG has a majority stake in Limetree Bay Ventures, an oil refinery and terminal in the Caribbean, and has invested in a gas pipeline project with Liquified natural gas (LNG) producer American Cheniere Energy LNG.A, as well as in oil and gas producer Aethon Energy.
The Aramco pipeline deal is similar to infrastructure deals made by Abu Dhabi National Oil Company (ADNOC) in the last two years, which raised billions of dollars by selling and leasing back its oil and gas pipeline properties. In two deals in October and February, a consortium that bought a stake in ADNOC’s gas pipelines refinanced bank debt with bonds.