When it comes to the global sale of bonds by any big corporation, the ratings it earns from the key rating agencies is a significantly important factor behind a decent performance and so is the case for even Saudi Aramco, the biggest producer of oil in the world. The state-owned oil behemoth is all set to debut with its bonds this year in global bourses and new development, it has attracted an A+ rating from the two key rating agencies, Moody’s and Fitch. Saudi Aramco had also planned a mega initial public offering that could have valued that company at a trillion dollars, but those plans have been shelved for now.
Aramco is one of the most cash-rich oil companies in the world and in 2018, the company recorded earnings that were way ahead of companies in the same line of business. In this regard, it is important to point out that its earnings were far bigger than that of Exxon Mobil, the gold standard among publicly listed oil companies. Before taxes, Aramco generated earnings to the tune of $224 billion. Aramco bonds are going to go on sale this week in markets all across the world, and that has necessitated forensic scrutiny of the company’s books by rating agencies. According to the rating agencies, the company’s excellent cash position has been one of the biggest factors behind the ratings. It has disclosed total debts of $27 billion on its books but at the same time, Aramco has cash reserves of $48.8 billion, and such a position pretty much makes the debts insignificant.
Fitch stated that the stability in Saudi Arabia is also directly linked to the A+ rating that they awarded the state-owned company. As such, it failed to get the same triple-A rating that is enjoyed by Exxon Mobil. Fitch stated,
Saudi Aramco’s rating is constrained by that of Saudi Arabia (A+/Stable). This reflects the influence the state exerts on the company through taxation and dividends, as well as regulating the level of production in line with its OPEC commitments.”
The company seeks to raise around $10 billion from the global bond sale, and a roadshow is supposed to be completed this week in the United States, Asia and Europe.