People familiar with the matter told Bloomberg News that the order book for the sale of Islamic bonds, or sukuk, is more than $60 billion.
The world’s largest energy company, Saudi Aramco, is selling bonds worth $6 billion in its first dollar-denominated Islamic bond sale.
According to a person familiar with the matter, the state-controlled company is offering Sukuk in three, five and 10 years, and the longest portion will receive 120 basis points more than the Treasury. This is down from the initial discussion of about 160 basis points.
The order book for the sale is more than $60 billion, said people familiar with the transaction, who asked not to be identified as the details are private.
The firm is raising cash to help finance its plans to pay $75 billion in dividends, a commitment the oil company made to garner support for its initial public offering. Aramco had to cut spending, cut jobs and sell non-core assets as the spread of the coronavirus and widespread lockdowns curbed demand for oil, which was Saudi Arabia’s main source of revenue, last year.
The price of Brent crude has rebounded after falling below a 21-year low of $16 a barrel at one point in 2020. Since then it has risen more than four-fold to $70 a barrel.
And while Aramco’s first-quarter profits rose — thanks to improvements in both crude and gas — its free cash flow fell short of the $18.75 billion needed to pay dividends for the period.
Aramco’s oil revenue accounts for about 40% of Saudi Arabia’s GDP and the recent rise in crude prices could push it even higher, Bloomberg Intelligence analysts Jamin Patel and Damien Sassovar wrote in a note on Tuesday. He said Saudi Arabia’s plan to reduce its dependence on Aramco would be challenged by the country’s fiscal deficit.