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By Celine Aswad
DUBAI, March 23 (Reuters) - Saudi Aramco has chosen a commonly used hybrid structure for a domestic offer of riyal-denominated Islamic bonds that will be the state-owned oil giant's first debt sale, the prospectus for the offer showed.
The debt issue is part of the state-owned oil giant's plans to develop new sources of finance in an era of low oil prices. They include what could be the biggest ever stock market listing in history next year.
At least 51 percent of the funds raised in the debt issue would be used in a mudaraba agreement, a form of Islamic investment management partnership, according to the prospectus. The money would be invested in Aramco's business and used for general corporate purposes.
No more than 49 percent would be used in a murabaha facility that would trade commodities with a special purpose vehicle. This could help to finance payments on the sukuk.
Aramco began meeting with potential sukuk investors on Wednesday and the sale may take place as early as next week, banking sources said on Wednesday.
It is part of a 37.5 billion riyal sukuk issuance programme established by Aramco.
Previously, the Saudi government and its companies easily financed themselves with oil income, but they are now being forced to issue debt.
The prospectus gave no indication of the planned pricing or size of the sukuk sale. Bankers told Reuters in February that they expected a deal of roughly 3 to 6 billion riyals ($805 million to $1.6 billion).
The prospectus said foreigners may own the sukuk, including those who are not resident in Saudi Arabia.
The sukuk will be tradable through the stock exchange, the prospectus showed, although it warned that trading may not begin immediately after issue because a registry agreement with the exchange may not have been signed by then.
Foreign ownership of riyal-denominated Saudi debt securities has so far been minimal, but the Capital Market Authority said in mid-2016 that it was amending its rules to let foreign institutional investors buy exchange-listed debt instruments.
The prospectus gave previously announced figures for the size of Aramco's oil and gas reserves and its production, but it contained no financial details of Aramco's profits or the condition of its balance sheet, which have long been secret.
Some of that information is likely to be revealed before Aramco conducts its planned global public offer of up to 5 percent of its shares next year, because foreign stock exchanges are expected to require more extensive disclosure.
In the meantime, bankers said they did not expect the lack of information - or the fact that Aramco has not obtained a credit rating - to deter buyers of the sukuk, given the firm's central role in the economy and ties to the government.
Arrangers and joint lead coordinators of the Aramco sukuk are Alinma Investment, HSBC Saudi Arabia, NCB Capital and Riyad Capital. They are joined by GIB Capital, Samba Capital and Saudi Fransi Capital for dealer roles.
(Writing by Andrew Torchia; Editing by Susan Fenton) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
DUBAI, March 23 (Reuters) - Saudi Aramco has chosen a commonly used hybrid structure for a domestic offer of riyal-denominated Islamic bonds that will be the state-owned oil giant's first debt sale, the prospectus for the offer showed.
The debt issue is part of the state-owned oil giant's plans to develop new sources of finance in an era of low oil prices. They include what could be the biggest ever stock market listing in history next year.
At least 51 percent of the funds raised in the debt issue would be used in a mudaraba agreement, a form of Islamic investment management partnership, according to the prospectus. The money would be invested in Aramco's business and used for general corporate purposes.
No more than 49 percent would be used in a murabaha facility that would trade commodities with a special purpose vehicle. This could help to finance payments on the sukuk.
Aramco began meeting with potential sukuk investors on Wednesday and the sale may take place as early as next week, banking sources said on Wednesday.
It is part of a 37.5 billion riyal sukuk issuance programme established by Aramco.
Previously, the Saudi government and its companies easily financed themselves with oil income, but they are now being forced to issue debt.
The prospectus gave no indication of the planned pricing or size of the sukuk sale. Bankers told Reuters in February that they expected a deal of roughly 3 to 6 billion riyals ($805 million to $1.6 billion).
The prospectus said foreigners may own the sukuk, including those who are not resident in Saudi Arabia.
The sukuk will be tradable through the stock exchange, the prospectus showed, although it warned that trading may not begin immediately after issue because a registry agreement with the exchange may not have been signed by then.
Foreign ownership of riyal-denominated Saudi debt securities has so far been minimal, but the Capital Market Authority said in mid-2016 that it was amending its rules to let foreign institutional investors buy exchange-listed debt instruments.
The prospectus gave previously announced figures for the size of Aramco's oil and gas reserves and its production, but it contained no financial details of Aramco's profits or the condition of its balance sheet, which have long been secret.
Some of that information is likely to be revealed before Aramco conducts its planned global public offer of up to 5 percent of its shares next year, because foreign stock exchanges are expected to require more extensive disclosure.
In the meantime, bankers said they did not expect the lack of information - or the fact that Aramco has not obtained a credit rating - to deter buyers of the sukuk, given the firm's central role in the economy and ties to the government.
Arrangers and joint lead coordinators of the Aramco sukuk are Alinma Investment, HSBC Saudi Arabia, NCB Capital and Riyad Capital. They are joined by GIB Capital, Samba Capital and Saudi Fransi Capital for dealer roles.
(Writing by Andrew Torchia; Editing by Susan Fenton) ((andrew.torchia@thomsonreuters.com; +9715 6681 7277; Reuters Messaging: andrew.torchia.thomsonreuters.com@reuters.net))
