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Saudi Aramco and the risk of inflation

The deluge of bids for the debut issuers shows how reliant investors have become on primary allocation.


There was no question that Saudi Aramco’s long-anticipated debut bond issue would be oversubscribed, but even the most seasoned market observer must have been slightly taken aback by the size of the order book for the deal.

Bookrunners Citi, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley and NCB Capital famously attracted $92 billion of orders for what ended up as a $12 billion issue.

Six months is clearly a long time in the international bond markets: last October JPMorgan’s Jamie Dimon was one of the first financiers to withdraw from the Future Finance Initiative conference in Riyadh in protest at the murder of Washington Post journalist Jamal Khashoggi. He was, however, very happy to put in an appearance at the launch of this deal.

For any bank or investor with even a half-hearted commitment to environmental, social and governance (ESG) criteria, a deal for an oil and gas producer based in a country with a toxic human rights record should have been a no-no. But this is Saudi Aramco: responsible for producing one in every eight barrels of crude oil in the world. It has five times the reserves of western rivals Total, Shell, Chevron, BP and Exxon combined.

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