Saudi Aramco Said to Raise $3 Billion in Debut Sukuk Sale

(Bloomberg) -- Saudi Aramco is planning to raise 11.25 billion riyals ($3 billion) from its debut Islamic bond, according to a person with knowledge of the offering, boosting the size of the sale because of investor demand.

Aramco, as the world's largest oil producer is known, is selling the debt with a seven-year tenure in a private placement at 25 basis points over the Saudi interbank offered rate, the person said, asking not to be identified as the information is private.

The company increased the size of the bond -- known as sukuk -- after demand exceeded supply, the person said. Aramco was initially seeking to raise about $2 billion under a 37.5 billion-riyal ($10 billion) program, people with knowledge of the matter said last month. The company had kept the order books open for an additional day, delaying the close to April 4.

The oil giant is selling debt ahead of an initial public offering in 2018 as the country's finance ministry plans to cut taxation on the company, potentially raising its valuation to more than $1 trillion, according to estimates by Sanford C. Bernstein & Co. The cut will boost Aramco's net income by 300 percent, putting per-barrel income in a range similar to that of international oil companies including Exxon Mobil Corp., Bernstein analysts said. 

Alinma Investment Co., GIB Capital, HSBC Holdings Plc, NCB Capital, Riyad Capital, Samba Capital and Saudi Fransi Capital are arranging the hybrid riyal Islamic bond.

Meanwhile, Saudi Arabia has hired Citigroup Inc., HSBC Holdings Plc and JPMorgan Chase & Co. as joint lead arrangers to help arrange investor meetings starting next week for a potential dollar sukuk offering. Aramco is also considering setting up a dollar-bond program, people said last year.

The closest Saudi Aramco has come in the past to selling debt is a 3.75 billion-riyal sukuk issued by Saudi Aramco Total Refining & Petrochemical Co., a joint venture with France's Total SA known as Satorp. In 2013, another Saudi Aramco joint venture, Sadara Chemical Co. with Dow Chemical Co., raised 7.5 billion riyals through a sukuk to finance a chemicals complex.

To contact the reporter on this story: Archana Narayanan in Dubai at anarayanan16@bloomberg.net.

To contact the editors responsible for this story: Dale Crofts at dcrofts@bloomberg.net, Shaji Mathew