Saudi Aramco lining up $7.5bn loan for pipeline investors

By Rahul Vaimal, Associate Editor
Saudi Aramco
Representational Image

The largest oil-exporting company in the world, Saudi Aramco is preparing for a loan of about $7.5 billion for potential investors in its oil pipelines, according to people familiar with the matter.

Saudi Arabia’s multinational petroleum and natural gas company reportedly has entered into discussions with leading lenders to secure favorable terms for the proposed funding packages that would be later offered to investors.

According to the sources, the current talks are happening in parallel with the sale of a stake in a pipeline unit, which could raise about $10 billion for Aramco.

The oil pipeline deal would be marked as the initial step of Saudi Aramco’s strategy to raise funds by selling leasing rights or shares in the non-core assets, by following the Abu Dhabi National Oil Company (ADNOC) path.

The Saudi oil company is working with advisers including JPMorgan Chase & Co. and Moelis & Co., the Wall Street investment bank that was earlier part of ADNOC’s deal. Meanwhile, Aramco refused to comment on the matter.

The UAE state-owned oil company ADNOC had generated more than $15 billion from Apollo Global Management, Brookfield Asset Management and Singapore’s sovereign wealth fund by selling the shares in its fuel-retail arm and leasing rights for properties and natural-gas pipelines.

Saudi Aramco, which for several years maintained only minimal corporate debt is increasingly exploring new sources of funding as it aims to retain its annual dividend payments of $75 billion at a time of lower oil prices. Most of those payouts go to the Saudi state, which requires the money to fund its budget. Even though the company was listed in Riyadh in late 2019, 98 percent is still owned by the Saudi government.

The oil company’s debt to equity ratio has jumped to 21.8 percent which is above its target range of 5 percent to 15 percent. The increase in debt of the firm is due to the loans it took last year to complete the $69 billion worth acquisition of Saudi Basic Industries Corp.(SABIC) a local chemical maker.

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