Saudi Aramco to launch US$2 billion bond sale ahead of IPO

Thu Mar 23, 2017 - 6:15am UTC

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Oil giant Saudi Aramco is set to debut a Sukuk sale of US$2 billion ahead of IPO. The Sukuk, or Islamic bond will represent a riyal-denominated bond sale, structured in a way to generate returns to investors without infringing Islamic law.

The bond sale comes in midst of the recent drop in oil price and aims to enhance Riyadh’s influence beyond oil diplomacy.

People familiar with the matter says that it will receive approval from Saudi Arabia’s capital markets authority by the end of the week.

This would allow the oil producing company to proceed with its Islamic bond sale in the second quarter. Looking at the development, this pre-IPO bond sale is only the first phase of a US$10 billion debt programme.

Tapping into the local debt market, the Islamic bond sales aims to boost the country’s Sukuk market, in addition to raising finance for its anticipated initial public offering (IPO) planned for 2018.

The company has hired HSBC Holdings Plc’s local unit and Riyad Capital as lead arrangers of the deal. While NCB Capital Co. and Alinma Investment Co. has also been recruited to work on a dollar-denominated bond sale.

A small portion of Saudi Aramco will be listed as early as 2017, and the shares could trade on up to four markets including New York, London, Hong Kong and Saudi Arabia’s capital Riyadh.

Deputy crown prince Mohammed bin Salman, who is pushing economic reform, estimates that the IPO will value Saudi Aramco at more than US$2 trillion.

By Vivian Foo, VCNewsNetwork

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