Saudi Arabian state-controlled oil company Aramco – the most profitable in the world – has raised US$12-billion in a bond issue that shows Western investors are keen to do business with the kingdom despite global outrage over last year’s killing of a dissident journalist.
Bonds from Saudi Aramco began trading in London on Wednesday after strong interest from investors, with bids reportedly reaching as much as US$100-billion. The Saudis had initially wanted to raise US$10-billion but issued $12-billion in the end, according to financial information provider FactSet.
Saudi Arabia faced international condemnation after the assassination in October, 2018, of Jamal Khashoggi by Saudi agents at the kingdom’s consulate in Istanbul. But the bond sale, which was run by banks including JPMorgan Chase and Morgan Stanley, shows continued interest from Western companies.
The money is meant to bring cash to the kingdom’s coffers. The proceeds of the bond will help Aramco in its $69-billion acquisition of majority shares in the Saudi petrochemicals firm SABIC from the country’s sovereign wealth fund. That money would then be used by the fund as it broadens its investments in an effort to diversify Saudi revenue away from its decades-old reliance on fossil fuels.
The interest in Aramco’s bonds marks a public-relations turnaround for Saudi Arabia. In October, more than 100 global executives, including chief executives of major U.S. and European companies, cancelled their participation in a Saudi investment forum in the wake of the Khashoggi killing.
The bond issue represents a rare chance to get a piece of Saudi Arabia’s state-dominated oil industry – and the huge profits it generates. In filings released before the bond issue, ratings agencies revealed that the company made US$111-billion in net income last year.
By contrast, Apple Inc. booked a net profit of about US$60-billion in its last full year, Royal Dutch Shell PLC had net income of US$23-billion and Exxon Mobil Corp. US$21-billion.
One firm that sat out on the bond sale was Kingdom Holding Co., the investment company chaired by Prince Alwaleed bin Talal, who was swept up in a wide-reaching anti-corruption campaign in 2017 led by the crown prince as he consolidated power.
Kingdom Holding CEO Talal Al-Maiman said the bond yields were a bit lower than what the firm aims for.
Speaking at a Bloomberg investment conference in Abu Dhabi, Mr. Al-Maiman said that the massive international interest in the bond is a positive sign for the kingdom.
“I think this is a success for Saudi Arabia,” Mr. Al-Maiman said. “It’s just a huge vote of confidence.”