According to a Bloomberg news written by Dana El Baltaji, Archana Narayanan, and Matthew Martin, Saudi Arabia hired advisors from prominent banks including Citigroup Inc. and Goldman Sachs Group Inc. for its first dollar-denominated Islamic bond sale.
Saudi Aramco is a state-owned as well as the world’s biggest energy company. It is expected that it may offer three tranches of notes due in three, five, and ten years. Differently from others, Islamic bonds or Sukuk follow the tenet of Islam, particularly the prohibition on interests.
Saudi Aramco is raising cash to assist its commitment to pay $75 billion in dividends, which it promised in order to gain support for its initial public offering. However, as a result of the spread of COVID-19 and widespread lockdowns last year, the price of Brent crude fell to slightly around $16 a barrel at one point in 2020, the lowest since 1999.
This economic situation directed the company to reduce spending. Since then, the price of oil has increased more than four-fold by exceeding $70 a barrel. However, Saudi Aramco’s free cash flow for the period fell short of the $18.75 required to pay the dividend. This planned sale would be the first since November in which the company raised $8 billion from a non-Shariah compliant offering.
According to Saudi Aramco’s statement, more than 10 banks have been ordered to organize investor calls from Monday onwards. These include Alinma Invest, Al Rajhi Capital, BNP Paribas, Citigroup, First Abu Dhabi Bank, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital, Riyad Capital, SMBC Nikko, and Standard Chartered Bank.