The Saudi plan to use their state-run oil giant, Aramco, as a piggy bank panned out fabulously for the Kingdom on Tuesday, with global investor demand topping $100 billion in Aramco's first-ever foray into worldwide debt markets. That would be the highest order book value since a record issuance by Qatar previous year, which attracted around $52 billion in orders.
The investor clamour raised even more interest than the Kingdom's sovereign bond market debut in 2016, which drew offers worth more than $67bn, and trounced the $52bn interest in the $12bn deal offered by Gulf rival Qatar.
That would represent an oversubscription of three times the size of the bond, if Aramco sticks to its plan to issue around $10-billion in the debt sale, due this week.
"Aramco is more transparent, has stronger credit metrics and is on an improving ESG [environmental, social and governance] trajectory whereas the government is more complex", said Mohieddine Kronfol, chief investment officer of Global Sukuk and Mena Fixed Income at Franklin Templeton Investments.
Having made core earnings of $224bn previous year and with $86bn in free cash flow at the end of 2018, Aramco does not need to borrow.
But for some investors Riyadh's control over the oil giant is an issue as its state ownership means decisions will ultimately be for the benefit of the government rather than investors.
Initial indications of over $30 billion in investor demand - before the bonds were actually sold - prompted Aramco to market the notes with nearly no premium to Saudi government debt.
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"The short part of the curve, three and five years, will be strongly bid by locals and some Asians".
Many see the deal as a relationship building exercise with worldwide investors ahead of its planned IPO, which was scheduled for previous year but then postponed to 2021.
"The roadshow is ongoing (and) the deal will close on Wednesday", Falih reportedly said. The offering also includes a three-year floating rate bond.
"Oil majors are more advanced in their efforts to further vertical integration, but national oil companies are catching up", Fitch Ratings wrote in a comment on the SABIC acquisition.
Aramco has lined up a roster of worldwide investment banks supporting its jumbo bond deal, which suggests the mood around dealing with Saudi Arabia is changing as the impact of the Khashoggi crisis ebbs.
The sale highlights the kingdom's continued commitment to its economic reform plans and is part of a fundraising strategy by Saudi Aramco to help fund its recent purchase of a $69.1 billion stake in Saudi Arabian Basic Industries Corp.