Aramco raises $6 billion from the first sukuk issuance.. Requests exceed $60 billion

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Aramco raised $6 billion yesterday, with the company returning to the global debt markets with its first US dollar-denominated sukuk, consisting of three, five and ten-year tranches.
A document issued by one of the banks arranging the transaction stated that Aramco sold $1 billion in bonds in a three-year bracket at 65 basis points over US Treasuries, and $2 billion in a five-year bracket at 85 basis points over US Treasuries, and $3 billion in a ten-year bracket at 120 basis points above US Treasuries.
According to “Reuters”, the initial indicative price was at about 105 basis points over US Treasuries of three-year bonds, about 125 basis points over US Treasuries of five-year notes, and about 160 basis points over US Treasuries of the 10-year tranche. The rate of return was reduced after the deal attracted more than $60 billion in orders.
At least part of the proceeds from the offering will be used to finance cash dividends. Aramco last year maintained its pledge of cash dividends of $75 billion to shareholders, despite the drop in oil prices, and is expected to bear the responsibility of pumping large domestic investments that are part of Saudi Arabia’s plans to develop its economy.
A source said that Aramco preferred to issue Islamic bonds over conventional bonds due to the high demand for the sukuk instrument due to the lack of dollar sukuk sales from the Gulf this year.
Aramco is widely expected to become a regular issuer of bonds after its first offering in a $12 billion deal in 2019, followed by another $8 billion in a five-part process in November last year that was also used to fund its dividend.
The source said Aramco was expected to raise up to $5 billion from the deal, which involved 29 active and passive book managers.
Among the book managers active in the issuance are “Citi”, “HSBC”, “JP Morgan”, “Al-Ahly Capital” and “Standard Chartered”. Among the passive book managers in the deal are BOC International and Dubai Islamic Bank.





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