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Saudi Aramco targets $3 billion bond sale to refinance debt and boost investments

Saudi Aramco, the world’s largest oil exporter, is set to raise at least $3 billion from its first bond sale in three years. This strategic move aims to refinance existing debt and support Aramco’s ambitious investment programs.

Debt offering with long-term maturities

The company plans to issue bonds with 10-, 30-, and 40-year maturities. Major banks, including Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley, and SNB Capital, have been enlisted to manage the sale.

Meetings with fixed-income investors are scheduled to begin on Tuesday.

While the initial target is $3 billion, the final amount could increase based on investor demand. Aramco has declined to comment on the bond sale specifics.

Strategic refinancing and investment

This bond sale follows the Saudi government’s $11.2 billion stake sale in Aramco.

The raised funds will primarily refinance existing debt and bolster the company’s extensive investment plans.

In February, Chief Financial Officer Ziad Al-Murshed indicated that Aramco might issue debt with maturities from 15 to 50 years in 2024, leveraging its strong balance sheet as financial markets stabilize.

Aramco is heavily investing in new gas resources, having recently signed $25 billion in construction contracts for the Jafurah project, a key part of its production strategy.

Historical bond sales and financial performance

Aramco’s bond issuance history includes its first bonds in 2019, followed by 50-year debt in 2020 and dollar-denominated Islamic notes in 2021. These sales have laid the groundwork for the current fundraising efforts.

Despite reporting lower profits in May, Aramco maintained its $31 billion quarterly dividend payout to the Saudi government and other investors.

The company’s free cash flow for the period was $22.8 billion, less than the total dividend payout. Al-Murshed stated that Aramco would continue to pay sustainable and progressive dividends without issuing debt to support them, with plans to increase dividends in the coming years.

Future outlook and investor sentiment

This bond sale is crucial for Aramco as it navigates the financial landscape to strengthen its position. By refinancing existing debt and investing in new projects, Aramco aims to maintain its leadership in the global energy market.

Investors will be watching the outcome of this bond sale closely, as it will indicate market confidence in Aramco’s financial strategy and long-term prospects. The involvement of major international banks suggests strong institutional interest and support for Aramco’s financial initiatives.

As the global energy market evolves, Aramco’s strategic decisions, including this bond sale, will be pivotal in shaping the company’s future. Successful execution could pave the way for further financial maneuvers, enabling Aramco to sustain its growth and competitive edge in the industry.

The post Saudi Aramco targets $3 billion bond sale to refinance debt and boost investments appeared first on Invezz

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