Aramco pipeline investors miss their target of selling bonds after raising...

© Reuters. The Saudi logo on an oil facility in Abqaiq in a photo from the Reuters archive.

from Youssef Saba

DUBAI (Reuters) – A group of institutional investors that last year acquired a stake in Saudi Aramco’s (SE:) oil pipeline network raised $2.5 billion from the sale of two-tranche bonds on Thursday, far less than they had hoped, a banking document showed. .

Amid the turmoil in the debt markets, the final spreads did not change from the indicative prices, with the deal attracting purchase orders amounting to about five billion dollars, according to the document.

A separate banking document earlier showed that the group, through EIG Pearl Holdings, seeks to raise between $3.5 billion and $4.4 billion.

“Investment deals are getting more and more difficult in light of market conditions,” said a banker away from the deal.

“Even the Coca-Cola (LON:) bond deal has run into difficulties,” he added, referring to Coca-Cola Easygic, the Turkish soft drink bottling company that sold $500 million in sustainability-related bonds on Thursday, according to IFR news service.

Global debt markets were shaken by the Federal Reserve’s sudden shift toward a faster rate hike and withdrawal of stimulus. As a result, borrowing costs have risen and investors are more reluctant to lend to companies until they know how much interest rates could rise further this year.

AIG Pearl Holdings sold $1.25 billion in a first tranche of 14 and a half to 15 years, at a yield of 185 basis points over the US, and $1.25 billion in bonds for 24 and a half to 25 years at 235 basis points.

In June, a consortium led by US-based EIG Global Energy Partners bought a 49 percent stake in the pipeline network (SE:) from Aramco, which holds a 51 percent stake in the company.

Under the deal, Aramco entered into a 25-year lease-back-lease agreement with the pipeline company.

The bonds are issued through EIG Pearl Holdings, of which investors led by EIG control an 89.45 percent stake, while Mubadala Investment Company, Abu Dhabi’s sovereign wealth fund, controls the rest.

The group led by EIG includes the Chinese government-owned Silk Road Fund, Saudi Arabia’s Hasana Company, the investment arm of the kingdom’s largest pension fund, and South Korea’s Samsung Asset Management.

A portion of the bonds will be refinanced through a $10.8 billion loan backing the pipeline deal. Sources said the loan will be refinanced through two or three bond deals, and the first bond issue is likely to raise at least $4 billion.

Citi and JP Morgan are coordinating the deal, which involves 17 other banks.

(Prepared by Ali Khafaji and Suha Jado for the Arabic Bulletin – Editing by Ahmed Hassan)

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