Saudi Aramco, the world's largest oil company, successfully raised $3 billion from the issuance of Islamic bonds, known as sukuk, according to a term sheet released on Thursday. The sale comes in the midst of geopolitical tensions following an Israeli attack on Qatar earlier this week, which did not deter investors.
The company priced $1.5 billion in five-year sukuk with a profit rate of 4.125% and another $1.5 billion in 10-year sukuk at a profit rate of 4.625%. Strong demand allowed Aramco to tighten the spreads on both tranches by 35 basis points from the initial price guidance, as final order books exceeded $16.85 billion.
Despite concerns over the attack on Qatar, which led to escalated military action in the region, investors remained unfazed. The surge in bond issuances from the Gulf region this month, including Saudi Arabia's $5.5 billion sukuk sale, reflects the robust investor demand and significant inflows into bond funds.
The debt raised by Aramco is intended for general corporate purposes, as the company navigates through a period of weaker oil prices. A consortium led by Global Infrastructure Partners (GIP), part of BlackRock, recently signed an $11 billion lease and leaseback agreement for Aramco's Jafurah gas processing facilities. The consortium is now in discussions to secure around $10 billion in debt to support the deal.
Active bookrunners on Aramco's sukuk transaction include Al Rajhi Capital Company, Citi, Dubai Islamic Bank, First Abu Dhabi Bank, Goldman Sachs International, HSBC, JPMorgan, KFH Capital, and Standard Chartered Bank. The sale is seen as a test of investor appetite for regional deals amid ongoing geopolitical tensions in the Middle East.
While Aramco did not immediately respond to requests for comments on the transaction, the successful issuance of Islamic bonds demonstrates the company's ability to attract capital in challenging environments, showcasing investor confidence in one of the world's leading oil producers.
