Saudi Arabia’s multinational petroleum and natural gas company, Saudi Aramco is issuing US dollar-denominated, sharia-compliant bonds as it targets to raise funds to boost its finances.
According to Armco’s statement in the Tadawul stock exchange, it has hired several banks including Al Rajhi Capital, BNP Paribas, Citigroup, First Abu Dhabi Bank (FAB) and Goldman Sachs to advise on the sukuk offering. The company did not disclose the value of the offer.
“The net proceeds from each issue of trust certificates will be used by Saudi Aramco for general corporate purposes or any other purpose specified in the final terms for a series of trust certificates,” the state-owned oil company said.
In the first quarter of this year, Saudi Aramco reported a 30 percent rise in first-quarter profit as revenue rose on the back of higher oil prices and an improved economic environment. Profit during the period reached $21.7 billion while revenue jumped to $72.5 billion.
Saudi Aramco also aims to list the bond on the London Stock Exchange’s main market for trading, the company said in the statement. Companies in the Gulf region have been taking advantage of low rates to raising debt as the global economy gradually emerges from an economic downturn caused by the COVID-19.
Other banks including HSBC, JP Morgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko and Standard Chartered Bank are also advising the company, according to the statement.
The planned sale would be its first since November when it raised $8 billion from a non-shariah compliant offering. Moody’s Investors Service assigned a (P)A1 rating to Saudi Aramco’s new sukuk program, citing its large operations, a strong financial profile with low production costs and modest debt.
“Saudi Aramco has excellent liquidity with consolidated cash balances and operational cash flows more than sufficient to meet group debt maturities, investment commitments and dividends over the next 12 to 18 months,” Moody’s said.
As of March 31, the company had $54.1 billion of cash and cash equivalents. It has total reported group debt worth $143.7 billion, out of which $17.7 billion is due within the next 12 months, the rating agency said.
Saudi Aramco’s liquidity is further bolstered by its “undrawn $10 billion multi-tranche revolving credit facility that it maintains at the corporate level and $12.4 billion in cash proceeds that will be received as part of its recent lease and leaseback transaction related to its crude oil pipeline network”, Moody’s said.