Saudi Aramco received more than $100 billion in orders for a debt offering of $10 billion—a massive over-subscription and an indicator of strong investor demand for exposure to the state-owned oil giant by theothersarahh
A natural gas liquids facility stands among desert dunes in Saudi Aramco's Shaybah oilfield in the Rub' Al-Khali desert in Shaybah, Saudi Arabia.ESG, or socially responsible investing, may be all the rage on Wall Street these days, but this has had little effect on the demand for Saudi Aramco’s recently announced debt offering.
To finance its purchase of a 70% stake in the Saudi Arabian Basic Industries Corp. , the Saudi government's petrochemicals company, from the country's sovereign wealth fund for some $70 billion in cash, Aramco is offering bonds that range from 3 to 30 years and will pay between 75 and 175 basis points above U.S. Treasury bond rates. Thus, at current Treasury rates a 10-year Aramco bond would yield about 2.77% and a 30-year would yield 4.68%.
Simply put, the bonds are the obvious choice for investors looking for Saudi exposure without taking on any additional political or governance risk. Ellen R. Wald, Ph.D., president of Transversal Consulting and author of, says that this bond offering is a much safer way to invest in the Saudi economy than, say, opening a foreign bank branch or retail location in Riyadh. “People are curious about the Saudi market,” she says, “and this is a low-risk way to get exposure.
Aramco’s fundamentals undeniably are strong. Moody’s Investor Service gave the company an A1 issuer rating last week , citing the company’s stable long-term outlook, low cost structure and robust balance sheet.
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