Saudi Oil Giant Readies $5B Bond To Fund Huge Dividend

07 Jun 2021

Saudi Arabia's oil giant Aramco plans to raise around US$5 billion in a new bond sale as early as this month, as it looks to fund its massive annual dividend of US$75 billion, Bloomberg reported on Wednesday, quoting sources familiar with the plans.

Saudi Aramco has already lined up more than a dozen banks to manage the bond sale, which will not be the first one for the oil giant in recent years. The debt sale could be both U.S.-denominated and denominated in the local currency in a sukuk, or Islamic bonds, issue, according to Bloomberg's sources.

"I think it was expected. They need the cash to pay the dividends that have been promised, they've done it in the past too," a debt banker told Reuters, commenting on the report of the upcoming bond issue.

According to a source who spoke to Reuters, HSBC, Standard Chartered, First Abu Dhabi Bank, and NCB Capital are among the banks hired to manage and structure the bond sale.

Aramco is also looking to refinance as much as US$10 billion in loans that it raised six years ago, banking sources told Reuters in April.

The Saudi state-held oil giant has been reportedly very active on the debt market in recent months after last year's crisis reduced its profits. At the same time, Aramco continues to pledge annual dividends of US$75 billion to shareholders, the biggest of which is the Kingdom of Saudi Arabia, with more than 98 percent.

Over the past two years, Saudi Aramco's debt levels have jumped nearly four times as the oil giant was financing the Sabic deal. Then the collapse in oil prices hit its revenues and profits.

Aramco may not be the only giant energy firm to tap the bond market this month as the state firms of the Gulf oil producers are looking to raise cash after the 2020 crisis hit profits and government revenues.

Qatar Petroleum has hired international banks for a debut public bond issue of up to US$10 billion by the end of June, two sources told Reuters earlier this week.

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