News ID: 84888
Date: 16 November 2020 - 21:10
RIYADH (MEMO) – Saudi Aramco is to sell billions of dollars in international bonds in a bid to bolster its balance sheet and meet its $75bn dividend target, as the coronavirus crisis hits its profits.
The oil giant made its debut in the international debt markets last year by raising $12bn, after receiving more than $1oobn in orders.
Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley and NCB Capital were hired to arrange investor calls starting on Monday for several tranches of potential bonds with maturities of between three and 50 years, Saudi Aramco said in a bourse filing.
It did not specify how large the issuance would be, but it is expected to run into the billions with benchmark bonds generally at least $500m per tranche.
Saudi Aramco, whose flotation in December 2019 was the world’s biggest IPO, earlier this month reported a 45 percent drop in third-quarter net income to $11.8bn.
The coronavirus pandemic has dramatically hit demand for oil this year, leaving the company’s debt levels spiraling.
The upcoming bond issue is designed to fill a financial gap after the disastrous year.
Saudi Aramco is under growing pressure to cut its spending and raise cash to help buffer the kingdom, which faces a ballooning budget deficit.
The company has cut capital expenditure by an estimated $25bn to $30bn this year.
Last week, rating agency Fitch lowered the outlook on Saudi Aramco from positive to negative over concerns about the government’s weaker finances.
Fitch said Saudi Aramco’s "ambitious” target of paying $75bn in dividends could result in post-dividend free cash flow turning negative in 2020 and 2021, before breaking even in 2023.
Saudi Arabia has been trying to diversify its economy for decades, as emphasized in its Vision 2030 plan launched by Crown Prince Mohammed bin Salman.
But the dual shocks of coronavirus and tumbling energy prices have hurt its plans.
Oil revenues account for around two-thirds of the kingdom’s exports.
But while Saudi Arabia was once responsible for nearly 30 percent of global oil exports, that figure has now dropped to just 12 percent, according to research consultancy Capital Economics.