Aramco to borrow up to $1.6bn with domestic sukuk

It would be the first sukuk issue by the state entity, which plans to approach the local investor base first and offer US dollar-denominated sukuk to international investors at a later stage

Other media reports said that Moelis & Co has been chosen as the sole independent adviser for the planned IPO.
Other media reports said that Moelis & Co has been chosen as the sole independent adviser for the planned IPO.

A planned domestic sukuk issue by oil giant Saudi Aramco is likely to be in the region of 3bn to 6bn riyals ($800mn to $1.6bn), Saudi Arabia-based debt capital market bankers said this week.

It would be the first sukuk issue by the state entity, which plans to approach the local investor base first and offer US dollar-denominated sukuk to international investors at a later stage, the bankers said, declining to be named because the matter is not yet public.

The sukuk are expected to be issued over the next two to three months, according to Reuters, adding however that the company and the banks arranging the transaction had not yet issued any official communication on the timeline.

Saudi Aramco declined to comment, Reuters reported.

The bond proceeds will be used to finance "new expansion projects", said a banker familiar with the matter. Early last year, Aramco's board approved the creation of a programme to issue sukuk, according to the company's official magazine, Arabian Sun.

The company is considering expanding its oil and gas production facilities at the Berri oilfield, a project which could cost approximately $1.7bn, sources told Reuters this month.

Among other projects, it is developing with partners a huge ship repair and shipbuilding complex at Ras al-Khair on the east coast. Officials have said that project will cost over 20bn riyals.

Alinma Investment, HSBC Saudi Arabia, NCB Capital and Riyad Capital have been appointed lead managers for the planned sukuk issue, according to Reuters.

Saudi Aramco plans to sell up to 5% of its shares in next year in what would be the world's biggest initial public offer. The international sukuk issue is unlikely to happen before the IPO, the sources said to Reuters.

"An international bond would require a lot of disclosure in the bond prospectus," said one of them, adding that domestic bonds would be bought by the local investor base without much questioning.

Other media reports said that Moelis & Co has been chosen as the sole independent adviser for the planned IPO, according to three people familiar with the process, scoring the New York boutique investment bank the biggest equity advisory mandate to date.

Riyadh hopes to use the IPO proceeds for investments in non-oil industries in order to wean the country off its most precious resource. Banks, advisory firms and consultancies have scrambled to secure work on the IPO since Saudi officials announced their intention a year ago.

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