Aramco to approach loan market again

By Sandrine Bradley

Apr 23 - Saudi Aramco is expected to refinance a US$10bn-equivalent revolving credit facility that was signed in March 2015.

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

In February it agreed to extend a US$10bn one-year term loan by 12 months to May 2022, while it is also in the process of finalising a US$10bn staple financing, which it is offering to investors looking to lease its pipelines. Aramco is being advised by JP Morgan and MUFG on the staple financing and sent out request for proposals to banks last month.

“Once the pipeline deal is out of the way we expect Aramco to turn its hand to the refinancing," a banker said.

Appetite for the RCF is expected to be strong, buoyed by pent-up bank liquidity in the region and the strength of the Aramco name. Also with the US$10bn term loan due to mature in May 2022, banks will have more capacity to lend to Aramco.

“There will be plenty of lender appetite for the refi, especially as the US$10bn [term] loan, which has just been extended, will mature relatively soon after it gets done,” said the banker.

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

The second tranche is a SR11.25bn (US$3bn) Murabaha facility, comprising a SR7.5bn five-year facility, with two one-year extension options and a SR3.75bn annually renewable 364-day facility, paying 11bp and 9bp, respectively.

There are 27 banks on the US$10bn dual-tranche RCF, led by global coordinators HSBC, JP Morgan and Riyad Bank.

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

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

Strong start

Loan activity in the Middle East continues to be strong, following a good start to the year where volume rose 23.8% year-on-year to US$22.4bn.

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

Saudi's sovereign wealth fund, the Public Investment Fund, kicked off activity in the kingdom in March after it signed a huge US$15bn multi-currency RCF.

(Editing by Chris Mangham)