Amin Nasser, chief executive officer of Saudi Arabian Oil Co., gestures as he speaks during a Bloomberg Television interview on the opening day of the World Economic Forum (WEF) in Davos, Switzerland, on Tuesday, Jan. 22, 2019. World leaders, influential executives, bankers and policy makers attend the 49th annual meeting of the World Economic Forum in Davos from Jan. 22 – 25. Photographer: Simon Dawson/Bloomberg
Photographer: Simon Dawson/Bloomberg
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Saudi Aramco’s CEO said the state-owned oil giant is talking to credit rating agencies in preparation for its first foray into the international bond market.
“We will decide soon how much we would like to take from the bond market,” said Amin Nasser at the World Economic Forum in Davos on Tuesday. “Definitely it’s going to be an international bond. We are currently in discussion with regard to how much and where.”
Aramco plans a bond offering later this year, likely to be at least $10 billion dollars, to help fund the acquisition of a majority stake in chemical giant Sabic from the kingdom’s sovereign wealth. Nasser confirmed the bond prospectus will force Aramco to publish details of its income statement and balance sheet for the first time.
Amin Nasser, CEO of Saudi Aramco, discusses the company’s preparations for an international bond sale.
Source: Bloomberg
“Aramco is a very successful company, we had great results in 2018,” he said. “All the data with regard to the gearing ratio of Saudi Aramco will be shared.”
Saudi energy minister and Aramco chairman, Khalid Al-Falih, announced plans to issue international bonds earlier this month.
Aramco has lots of room to borrow as there’s hardly any net debt, accounts obtained by Bloomberg News for the first half of 2017 show. At that time, the company had about $20 billion of borrowings, offset by $19 billion of cash and equivalents.
Kingdom’s debt
While Aramco prepares for its debut international bond, the kingdom itself sold $7.5 billion of international debt this month in the first test of how much damage the killing of Washington Post columnist Jamal Khashoggi has inflicted on investor appetite.
Nasser declined to comment on how Aramco’s bonds would be prices versus the kingdom’s sovereign debt.
The oil behemoth has so far largely avoided bond markets, relying almost exclusively on its own cash or bank loans. The closest it came was when it raised 11.25 billion riyals ($3 billion) in a debut local currency Islamic bond sale. The prospectus for the 2017 offering didn’t include any financial information, according to a copy of the document reviewed by Bloomberg News.
Aramco is in talks to buy as much as 70 percent stake of Sabic, providing a cash pile for the kingdom’s sovereign wealth fund.
The deal would be a wager on petrochemicals as the future of the global energy industry. For Saudi Arabia, it provides money for the Public Investment Fund to support Crown Prince Mohammed bin Salman’s plans to shift the economy away from fossil fuels.
Aramco may do further deals in chemicals, Nasser said.
“Organic growth is not going to allow us to meet our aspiration of being a leading chemical company,” he said.
Saudi Basic Industries Corp., as Sabic is known, was proposed last year after the planned initial public offering of Aramco was postponed because international investors balked at the crown prince’s $2 trillion valuation. By channeling money from Aramco to the PIF, two arms of the Saudi state, it offered another route to free up the cash originally sought from the IPO.
The deal is likely to be the biggest oil and gas industry acquisition since
BG Group Plc for $79 billion in 2016.
