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Islamic Finance

Saudi Aramco hires banks for debut dollar sukuk sale

Published 07 Jun,2021 via Bloomberg Markets - Saudi Aramco, the world’s biggest energy company, has hired banks for its first ever dollar-denominated Islamic bonds.

The state-controlled company may offer three tranches of notes, according to a person familiar with the matter. Islamic bonds, or sukuk, comply with the religion’s teachings, including its ban on interest.

The firm is raising cash to help fund its commitment to pay out $75 billion in dividends, a pledge Aramco made to drum up support for its initial public offering. But with the spread of coronavirus and widespread lockdowns curbing demand for oil last year, the price of Brent crude plunged to just below $16 a barrel, the lowest since 1999.

That prompted Aramco to reduce spending, cut jobs and sell non-core assets. The price of oil, Saudi Arabia’s main source of revenue, has since climbed more than four-fold to over $70 a barrel. And while the company’s first-quarter profits soared -- thanks to the recovery in both crude and gas -- its free cash flow fell short of the $18.75 billion needed to pay the dividend for the period.

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Dana El Baltaji