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Aramco Seeks at Least $3 Billion From First Bond Sale in Three Years

(Bloomberg) -- Aramco is looking to raise a minimum $3 billion from its first bond sale in three years, people familiar with the plan said, adding to Saudi Arabia’s debt spree this year.

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The world’s biggest oil exporter is offering debt with 10-, 30- and 40-year maturities, according to a person with knowledge of the matter. Meetings with fixed income investors are expected to start Tuesday, the person said, with funds likely to be used to refinance existing borrowings and contribute to its investment program.

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The Saudi government and its various units have been borrowing vast amounts this year, topping China as the biggest issuer of international debt among emerging markets. Aramco, whose massive dividend payout is a significant contributor to Crown Prince Mohammed Bin Salman’s economic diversification plan, is expanding natural gas production at home, spending billions to maintain oil output and pursuing acquisitions overseas.

The final size of the borrowing could be larger depending on investor demand. A spokesperson for Aramco declined to comment.

Chief Financial Officer Ziad Al-Murshed said in February that the firm could look to sell long-dated debt this year as financial markets improve and the company looks to leverage its massive balance sheet. The plan to issue long-maturity bonds shows Aramco is confident it can remain relevant well past the middle of the century even as the energy transition raises questions over future oil demand.

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Aramco has hired banks including Citigroup Inc., Goldman Sachs Group Inc., HSBC Holdings Plc, JPMorgan Chase & Co., Morgan Stanley and SNB Capital to manage the bond sale, it said in a statement Tuesday.

The bond issue comes weeks after Saudi Arabia offloaded an $11.2 billion stake in Aramco. The government, which needs the funds to help cover an expected fiscal shortfall, has accounted for more than half of the $33 billion of debt sold by Saudi entities this year.

Investment Plan

Aramco has embarked on a large investment plan of its own. It’s the world’s biggest oil-producing company and is developing new gas resources, including $25 billion of contracts for the Jafurah project. The firm is seeking stakes in LNG projects in the US and is poised to take a share in an automotive joint venture.

Aramco sold its first bonds in 2019, followed by 50-year debt in 2020 and issued dollar-denominated Islamic notes in 2021.

In May, the company maintained its $31 billion quarterly dividend payout to the Saudi government and other investors despite lower profit. Its free cash flow — funds from operations minus capital expenditure — of $22.8 billion in the period was less than the total payout.

The company will continue to pay what it can afford and won’t need to issue debt to support the dividend, Al-Murshed said in February. The base dividend will be “sustainable and progressive,” meaning the company aims to increase it in coming years, he added.

--With assistance from Anthony Di Paola.

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