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Financials

Saudi Aramco closes US$10bn loan

LONDON, May 12 (LPC) - Saudi Aramco, the world’s largest oil producer, has closed a US$10bn one-year term loan with a club of core relationship banks.

The loan was led by HSBC, SMBC and First Abu Dhabi Bank as coordinators, bookrunners and mandated lead arrangers. First Abu Dhabi Bank also acted as facility agent.

They were joined by BNP Paribas, Citi, Credit Agricole, JP Morgan, Mizuho, MUFG and Societe Generale as mandated lead arrangers and bookrunners.

The loan, which has an opening margin of 50bp over Libor, has a one-year extension option at the lenders’ discretion, one banker said.

“Aramco has the draw to get relationship banks on board at this pricing. In the current market, this is close to where banks’ internal cost of funding sits, but it is a big company and there is plenty of ancillary business to justify it,” the banker said.

The borrower is aiming to take the loan out in the bond market by the fourth quarter of this year, the banker said.

“As soon as the bond market has stabilised they will look to replace the loan with a bond. We are already seeing some stabilisation, with sovereigns beginning to tap the market.

These will be followed by top tier government-related entities and then quasi-sovereign entities. Once the latter starts happening I think Aramco will be ready to go,” he said.

Aramco officially requested a one-year term loan to be used for general corporate purposes, but bankers expect at least some of it to be used to back the borrower’s acquisition of a 70% stake in Sabic from Saudi’s Public Investment Fund that was agreed last year.

Saudi Aramco did not immediately reply to a request for comment.

Aramco on Tuesday reported a 25% fall in first-quarter net profit, missing analyst estimates, but its quarterly dividend was in line with a plan for a US$75bn payout for the year.

Analysts had expected Aramco, which went public last year, to maintain payouts to minority shareholders while cutting the dividend to the Saudi government, whose finances have been battered by plunging oil prices amid the coronavirus pandemic. (Editing by Chris Mangham)

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