After being shunned by Wall Street and international investors last year, Saudi Arabia made a roaring comeback on Tuesday as oil giant Aramco received more than US$100 billion in orders for its maiden global bond.
The bond sale is largely seen as Plan B to raise money for the kingdom’s economic agenda after the initial public offering of Aramco was postponed until at least 2021 from an initial 2018 target. In effect, Saudi Crown Prince Mohammed bin Salman, who runs the country day-to-day, is using the state oil producer’s pristine balance sheet to finance his ambitions.
“The market shows no signs of wishing to balk at the latent political risk attached to Saudi,” said Anthony Peters, a strategist at Blockex Ltd. In London. With strong demand, Aramco told investors it expects to pay about 1.25 percentage points more than U.S. Treasuries for its 10-year notes, compared with Saudi sovereign bonds trading at about 1.27 percentage points. Traditionally, those risk premiums fall in a high-demand bond sale as the process advances, suggesting Aramco may pay even less.
Aramco has lined up a roster of international banks supporting its jumbo bond deal, another indication of how the mood in Wall Street toward the kingdom has changed. The banks not only want to participate on the bond sale, but also ensure they’re well placed in case Aramco goes ahead with its planned IPO.