Aramco gives initial guidance for six-tranche debut dollar bond

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Saudi Aramco has received over $50 billion in bids for its debut worldwide bond sale, which had been expected to be in the $10 billion region, sources familiar with the matter said. The bond is expected to attract demand from both emerging markets and investment-grade buyers, as Aramco's status as the world's largest oil company would put its bonds in the same league as those issued by independent worldwide oil majors like Exxon and Shell.

Before the six-part bond deal was marketed on Monday, Saudi Energy Minister Khalid Al Falih said initial indications of interest for the paper was more than $30bn. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

According to various media citing sources close to the transaction, based on demand-which can sometimes be inflated by investors-the bond sale will raise at least $10 billion, and possibly $12 billion.

The order book for Aramco expanded from about $40 billion when the deal kicked off, people with knowledge of the deal said.

The Aramco bond has attracted interest from a wide range of investors, as the oil producer's vast profits would put its debt rating - if unconstrained by its sovereign links - in the same league as independent oil majors such as Exxon Mobil and Shell.

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Saudi Aramco's crucial bond issue, set to close on Wednesday, has already attracted higher-than-expected interest from global investor.

Initial indications of over $30 billion in investor demand - before the bonds were actually sold - prompted Aramco to market the notes with nearly no premium to Saudi government debt.

That demand will allow Aramco to pay less for its debt than the Saudi government - a rare development for a state-owned entity, and underscoring the financial strength of the world's most profitable company.

Analysts, however, expect part of the money to fund Aramco's acquisition of a controlling 70 percent stake worth $69 billion in Saudi Basic Industries Corporation (Sabic), a state-owned petrochemical company. The banks not only want to participate on the bond sale, but also ensure they're well placed in case the kingdom goes ahead with an initial public offering for Aramco. But accounts published before the firm's debut in the global bond market also show Aramco - an organization that produces about 10 percent of the world's crude - doesn't generate as much cash per barrel as other leading oil companies like Shell because of a heavy tax burden.

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