Aramco Raises $6 Billion via Islamic Bond

Saudi Aramco has raised $6 billion via an Islamic bond, or sukuk, which drew strong demand from international investors, according to people close to the matter (IOD Jun.8'21). The funds will help the Riyadh-listed oil giant finance its hefty dividend obligations to the Saudi government as well as its upstream expansion plans. Strong International Interest Investors from Japan, Hong Kong, Australia, Russia and Eastern Europe were among those that subscribed to the bond, some of which were first-time buyers of Aramco debt, one person said. The strong demand for the bond issued by the world's top oil company comes against a backdrop of rising pressure on international oil companies from governments, investors and the public to decarbonize their operations. Financial Commitments Despite last year's low crude prices and a fall in oil demand due to the pandemic, Aramco still dished out $75 billion in dividends and is committed to deliver a similar amount this year (IOD Apr.13'21). The company is also increasing its capital spending to proceed with expansion projects involving several offshore oil fields aimed at boosting oil production capacity to 13 million barrels per day from 12 million b/d. Rising Debt Aramco's inaugural US-dollar denominated Islamic bond issue will add to its rising debt pile, which at the end of the first quarter stood at $89.6 billion, putting the company's gearing at 23%. Its debt has risen largely because of Aramco's $69 billion acquisition of a 70% stake in petrochemical giant Saudi Basic Industries Corp., although the payments for that deal will be spread out until 2028 (IOD Jun.18'20). Aramco has also moved to monetize some of its assets in recent months to raise funds, entering a lease-and-lease-back pipeline deal with a consortium led by EIG Global Energy Partners that raised $12.4 billion of cash (IOD Jun.9'21). In total, the company has raised almost $50 billion since 2019, including conventional bonds and loans. Amena Bakr and Oliver Klaus, Dubai