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Saudi Aramco Sells $ 6bn USD Islamic Bonds | Business and economic news


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The order books for the sale of Islamic bonds, or sukuk, exceed $ 60 billion, people familiar with the matter told Bloomberg News.

From Bloomberg

Saudi Aramco, the world’s largest energy company, is selling $ 6 billion in bonds in its first sale of dollar-denominated Islamic bonds.

The state-controlled company is offering sukuk with maturities in three, five and 10 years, and the longest portion will generate returns 120 basis points above Treasury bonds, according to someone familiar with the matter. This is less than in the initial discussions of about 160 basis points.

Sales order books exceed $ 60 billion, people familiar with the deal said, who asked not to be named because the details are confidential.

The firm is raising cash to fund its $ 75 billion dividend plan – a commitment the oil company made to secure support for its initial public offering. Aramco had to cut costs, cut jobs and sell non-core assets as the spread of the coronavirus and widespread restrictions curbed demand for oil last year, Saudi Arabia’s main source of income.

The price of Brent crude has rebounded after falling to a 21-year low of just under $ 16 a barrel at some point in 2020. Since then, it has more than quadrupled to over $ 70 per barrel.

And while Aramco’s first-quarter earnings rose sharply – thanks to a rebound in both crude oil and gas – its free cash flow did not reach the $ 18.75 billion required to pay dividends for the period.

Aramco’s oil revenues account for about 40% of Saudi Arabia’s gross domestic product, and the recent increase in crude oil prices could lead to even more growth, Bloomberg Intelligence analysts Jaimin Patel and Damian Sassover wrote on Tuesday. Saudi Arabia’s plans to reduce its dependence on Aramco will be questioned by the country’s budget deficit, they said.

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