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The world's largest oil company Saudi Aramco is forced to borrow money to pay dividends

Asia / Business and Finance

Saudi Aramco last entered the international debt market last April, placing five tranches of Eurobonds totaling $ 12 billion.

The world's largest oil company Saudi Aramco is forced to borrow money to pay dividends

Saudi Aramco's third-quarter profits fell 45% due to falling oil prices. The corporation has cut costs and staff and is considering the possibility of selling a number of its assets, but despite this, the percentage of the company's debt from equity rose to 21.8%, which is above the target range of 5% to 15%, writes Bloomberg.

Saudi Aramco's third-quarter 2020 net profit fell to 44.21 billion riyals (approximately $ 11.79 billion) from 79.84 billion riyals a year earlier. Overall, in the nine months of 2020, the company's net profit fell to 131.3 billion riyals (approximately $ 35 billion) from 255.71 billion a year earlier.

In this regard, the world's largest oil company does not have enough funds to fulfill its obligation to pay dividends in the amount of $ 75 billion. Most of these funds, as noted by Bloomberg, are intended for the government of Saudi Arabia - the main shareholder of the corporation, which needs money to cover the growing budget deficit.

Goldman Sachs, Citi, HSBC, JPMorgan, Morgan Stanley and NCB Capital are appointed as the organizers of the placement. Starting November 16, Saudi Aramco will be holding talks with investors. After that, depending on demand, up to five tranches of dollar bonds with a maturity of 3 years, 5 years, 10 years, 30 or 50 years can be placed.

The international rating agency Fitch has affirmed Saudi Aramco's long-term issuer default rating (IDR) at "A ". At the same time, the rating outlook was changed to "negative " from "stable " following a similar action on the rating of Saudi Arabia.

Late last year, Saudi Aramco conducted an IPO on the local Tadawul exchange.

The volume of the offer was 3 billion shares, or 1.5% of the capital. In January 2020, an option was exercised to place an additional 450 million shares. As a result, the total volume of placement reached a record $ 29.4 billion for the global IPO market.

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