Aramco is tapping the international bond market for a two-part debt sale, its second major dollar offering of the year and the latest in a flood of issuance this month from Saudi Arabia.
The state-backed oil behemoth is offering five- and 10-year dollar-denominated sukuk, or Islamic bonds, at initial pricing guidance of about 105 basis points and 115 basis points over US Treasuries, a person familiar with the matter said, asking not to be identified as the discussions are private.
It will be the third big debt sale out of Saudi Arabia in the past week, following $7.5 billion of total deals by the government and the sovereign wealth fund. The Saudi state has raised nearly $20 billion through dollar- and euro-denominated debt this year through Sept. 3, inching closer to a record set in 2017, and making it one of the busiest issuers in emerging markets.
Aramco, which raised $5 billion in May and sold a total of $9 billion in bonds in 2024, has been boosting borrowings for projects and as it tries to fund a massive dividend that it’s struggled to fully cover with free cash flow. The company’s net debt rose to $30.8 billion in the quarter ended June from $24.7 billion in the previous three months, while profit declined for a 10th straight quarter due to softer oil prices.
The higher borrowing drove up the gearing ratio to 6.5 percent in the second quarter from 5.3 percent three months earlier. Still, that level is low compared with Western oil majors, with the ratio for Shell Plc at 19 percent.
Aramco recently flagged its intention to remain active in debt markets and to look at new types of debt instruments like commercial paper, or issuances in various currencies or locations.
The Saudi government has been bumping up debt sales as it tries to plug a budget deficit driven by a combination of low oil prices and heavy spending on Crown Prince Mohammed bin Salman’s economic-diversification projects. The state raised $5.5 billion last week, followed by a $2 billion deal by the Public Investment Fund.
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