Petronas seeks lowest-ever coupon in dollar bond deal

The state oil company plans to sell a 7-year note to raise a maximum RM2.5b, according to people familiar with the deal


MALAYSIA’S state oil company started marketing a dollar bond offering yesterday at what’s likely to be its lowest coupon ever amid a rebound in resource prices.

Petroliam Nasional Bhd (Petronas) plans to sell a seven-year note to raise a maximum US$600 million (RM2.47 billion), according to people familiar with the deal.

It set an initial price of 125 basis points (bps) over the benchmark Treasury, they said. That works out to a coupon of around 2.5%, which would be the least ever, and the spread could tighten further during marketing.

The bond deal comes at a volatile time in the debt market, but investors may cheer the recovery in energy, chemical and commodity prices. That’s partly boosting the outlook for these businesses as demand is depressed by Covid-19 returns.

Thai chemicals company PTT Global Chemical pcl’s US$1.25 billion note last week received orders more than five times the issue size.

Petronas, which doesn’t tap international markets frequently, will be selling dollar bonds in successive years for the first time, according to data compiled by Bloomberg.

It previously issued a US$6 billion jumbo note in April last year, pricing the shortest 10-year portion at 290bps over the benchmark.

The company last sold a seven-year note in March 2015, pricing the US$750 million tranche at 130bps over the benchmark, according to data compiled by Bloomberg.

Petronas Energy Canada Ltd, the issuer of the latest offering, will use proceeds for refinancing existing debt, general corporate purposes and to fund continued development and production activities, the people familiar with the matter said. — Bloomberg