Post by : Bianca
Haleem
Photo: Reuters
Saudi Aramco, the world’s biggest oil company, has released a new prospectus (a document explaining financial plans) for its Islamic bonds, also known as sukuk. This means Aramco might soon borrow more money by selling sukuk. The document was shared with the London Stock Exchange on May 30, and it says Aramco has one year to issue these sukuk bonds.
Earlier this week, Aramco raised $5 billion by selling regular bonds. The company may be using this time—when the financial markets are fairly stable—to borrow more money before conditions change again.
Zeina Rizk, who works at Amwal Capital Partners and is an expert in bonds, said,“Aramco is likely trying to make the most of the current calm in the market to borrow money again.”
Recently, Aramco has seen a drop in profits because oil prices have fallen, and there is too much supply. In March, the company announced that it would cut its dividend payments by about one-third. A dividend is money paid to shareholders from the company’s profit.
According to report last week, Aramco is also looking at selling some of its assets to get more money. This will help the company grow in other countries and handle the effects of lower oil prices.
Several big banks are helping Aramco manage this sukuk program. These include Citi, HSBC, and JPMorgan, who are the main organizers. Other banks involved are First Abu Dhabi Bank, Goldman Sachs, Morgan Stanley, SNB Capital, and Standard Chartered.
So in simple terms, Aramco is borrowing more money through both regular bonds and sukuk. It’s doing this to manage lower profits and continue its plans to grow around the world.
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