Aramco moves closer to loan market again

By Sandrine Bradley

April 23 – Saudi Arabia is expected to refinance a US$10 billion revolving credit facility that was signed in March 2015.

The deal is expected to launch later this year, most likely in the second half of the year, and would be Aramco’s third foray into the loan market in 2021.

In February, it agreed to extend a $10 billion one-year term loan for 12 months to May 2022, while it is also in the process of finalizing $10 billion in seed funding, that it offers to investors wishing to lease its pipelines. Aramco is being advised by JP Morgan and MUFG on core financing and sent out a request for proposals to banks last month.

“Once the pipeline deal is complete, we expect Aramco to look to refinancing,” a banker said.

Appetite for RCF should be strong, supported by pent-up bank liquidity in the region and the strength of the Aramco name. Additionally, with the US$10 billion term loan due to mature in May 2022, banks will have more ability to lend to Aramco.

“There will be a lot of lender appetite for the refi, especially since the $10 billion [term] loan, which has just been extended, will mature quite soon after its execution,” the banker said.

The existing RCF of US$10 billion from March 2015 is divided into two tranches. A $7 billion tranche, comprising a $6 billion, five-year facility with two one-year extension options that have been exercised, and a $1 billion, 364-day annually renewable facility, paying margins of 12 basis points and 10 basis points, respectively.

The second tranche is a SR11.25 billion ($3 billion) Murabaha Facility, comprising a five-year SR7.5 billion facility, with two one-year extension options and a 3-year facility. SR.75 billion renewable over 364 days, paying 11 bps and 9 bps, respectively.

There are 27 banks on the $10 billion two-tranche RCF, led by global coordinators HSBC, JP Morgan and Riyadh Bank.

HSBC and JP Morgan were joined by Bank of China, Citi, Deutsche Bank, Standard Chartered, SMBC and MUFG as mandated lead bookrunners and arrangers on the $7 billion tranche.

Riyad Bank has been joined by Alinma Bank and National Commercial Bank as mandated lead bookrunners and arrangers on the Islamic tranche.

Good start

Lending activity in the Middle East continues to be strong, following a strong start to the year where volume grew 23.8% year-on-year to $22.4 billion.

State-owned utility company Saudi Electric Company approached banks to refinance a $1.58 billion tranche of a $2.15 billion unsecured syndicated loan it signed in November 2018, while the financial services firm Capital SABICowned by chemical company Saudi Arabia Basic Industries Corp, is also expected to ask banks for the second of two one-year extensions available under its five-year, $2 billion RCF from December 2015.

Saudi Arabia’s sovereign wealth fund, the Public Investment Fund, launched operations in the kingdom in March after signing a whopping $15 billion multi-currency RCF.

(Editing by Chris Mangham)

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

Priscilla C. Carnegie