Saudi Aramco chooses Islamic bonds in the run-up to its much-anticipated IPO

Published March 23rd, 2017 - 11:03 GMT
Saudi Aramco's IPO is scheduled in the second half of 2018. (AFP/Fayez Nureldine)
Saudi Aramco's IPO is scheduled in the second half of 2018. (AFP/Fayez Nureldine)

Saudi Arabian Oil Co., Aramco, is seeking to issue USD2 billion worth debut Islamic bond sale, the first step of a plan to tap markets for $10 billion, said sources. Aramco will sell riyal-denominated Islamic bonds, or sukuk — the sukuk may be privately placed with investors, they said.

Mohamed Ramady, a London-based independent analyst, said that this is the first time the mother company Aramco issues sukuk but this doesn’t mean that it lacks experience in this domain.

Commenting on why Aramco chose issuing sukuk instead of other types of funding, Ramady stated that sukuk is the ideal solution for a company like Aramco. He added that the company will use sukuk to fund its new projects such as projects of renewable energy in which Aramco is willing to invest USD5 billion. “It might also make use of sukuk in engineering projects such as navy industries projects in Ras Al Khair,” added Ramadi.

Sources informed Bloomberg that Aramco selected four banks to arrange the deal: HSBC Saudi Arabia, National Commercial Bank, Riyad Bank and Alinma Bank.

Saudi Aramco is preparing to sell 5% of its shares in an IPO scheduled in the second half of 2018 – it asked, last month, banks including Goldman Sachs Group Inc. and HSBC to pitch for an advisory role on the IPO.

Bloomberg revealed in 2016 that Aramco has commenced talks with banks for a program of sukuk issuance that might cover large stakes throughout the coming years, for the first time in its history.

By Wael Mahdi

 


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