The ‘US$100b man’ — Aramco CEO delivers record-breaking bond

By BLOOMBERG

LONDON • When Amin Nasser (picture) met investors at the palatial St Regis hotel in midtown Manhattan last week, the CEO of the world’s biggest oil company had one clear message — we’re in a league of our own.

After a bruising two years of being buffeted by delays to an initial public offering (IPO), investor scepticism over the valuation and profound change within Saudi Arabia, the CEO was here to set Wall Street straight.

“Saudi Arabian Oil Co (Aramco) is no ordinary oil company,” the 60-year-old petroleum engineer told his audience, according to a person who was present.

A week later, it’s clear the bankers believed him. Aramco sold US$12 billion (RM49.32 billion) of bonds on Tuesday in what was one of the most oversubscribed offerings in history.

In an incredibly rare turn, demand was so high that the company was able to borrow at a lower yield than its sovereign parent. More importantly, the sale demonstrated Saudi Arabia’s return to the global capitalist fold after being ostracised over the assassination of Jamal Khashoggi last year.

For Nasser, the bond sale is the apotheosis of his career, all the more remarkable because the revelations it brought would have been unthinkable just a few years ago.

After decades of secrecy, Aramco has in quick succession revealed its balance sheet, the status of oil fields and the financial relationship with the government, its only shareholder.

Strong Reputation
“Aramco executives have a strong reputation, they are straight shooters,” said Jim Krane, an energy research fellow at the Baker Institute at Rice University in Houston.

“If they say they are going to do something, they do it.”

Aramco, which pumps about one in every 10 oil barrels globally, isn’t just the world’s most profitable company, easily outpacing American titans such as Apple Inc and JPMorgan Chase & Co, it’s also the cash cow sustaining the entire kingdom.

Even with that track record, the task of selling debt was daunting. For the first time in four decades, the company would be answerable to someone other than the government.

While Aramco was already regarded as a well-run company, comparable to any international competitor, the search for bond investors required a whole new public vocabulary as officials for the first time answered questions on balance sheets and cashflows.

To accomplish the transition, Nasser surrounded himself with a small team of executives, all of whom went from anonymity to Wall Street A-list within a week.

Global Roadshow
Among them was Khalid Dabbagh, who became CFO only a year ago, and Motassim al-Ma’Ashouq, the treasurer who led the preparations for Aramco’s now delayed IPO.

Both handled most of the global roadshow, according to people familiar with the presentations, who asked not to be identified because the meetings were private. Other senior managers such as Yasser Mufti, the head of strategy, also pitched in.

Collectively, they delivered what Crown Prince Mohammed Salman presumably wanted — a blockbuster deal, attracting almost US$100 billion in orders, that was so sought after it actually reduced overall borrowing costs for the kingdom.

The company’s profile combined with investors’ hunt for yield in emerging markets made the bond offering irresistible for many, said Jason Bordoff, the director of the Centre on Global Energy Policy at Columbia University in New York.

In an era of diminishing or negative yields, Aramco’s longest-dated bonds received the strongest demand.

Global Community
Those seeking to use the sale as a gauge of Saudi Arabia’s rehabilitation into the global community should take that into account, said Karen Young, a resident scholar at the American Enterprise Institute in Washington and a specialist in the political economy of the Middle East.

“The success of the Aramco bond debut said more about global investor appetite,” she said.

Aramco has also deployed an army of investor relations specialists over the past two years, initially focused on the planned IPO and then the bond sale.

Fergus MacLeod, formerly head of investors relations at BP plc, led the effort with Louise Hough, a 25-year veteran at Credit Suisse Group AG, and Ruban Chandran, another BP alumni.