Anonymous ID: 96d882 April 9, 2019, 4:19 a.m. No.6106853   🗄️.is đź”—kun   >>6900 >>6998 >>7025 >>7144 >>7439 >>7481

8.5x Oversubscribed: Aramco's Bond Offering Greeted With Record $85 Billion In Orders

Yesterday, when previewing the massive Aramco bond offering coming in a time of sheer yield desperation, and when the offering was "only" 4x oversubscribed, we said that demand could even surpass the record $53 billion in bids that Qatar received for its $12 billion bond sale last year. Well, fast forward just 24 hours later when not only is the Saudi murder of Jamal Khashoggi long forgotten, but demand for the inuaugural bond has doubled and with hours to go before the 6-part bond offering prices, there is now a staggering $85 billion of orders from investors.

 

The Saudi state-backed oil giant, which last week revealed that it was the world’s most profitable company, earning over $110 billion each year.

opened up the six-part bond sale to investor orders on Monday. At that point the historic $10 billion (but soon to be upsized) offering was already 3x oversubscribed from investors in Europe, Asia and the US. And, as the FT reports, by Tuesday morning the order book had risen to a staggering $85 billion, "a potential record for an emerging-market bond sale, surpassing the $67bn of demand Saudi Arabia itself saw in its wildly popular 2016 bond market debut."

 

But wait, because with hours still left for the underwriters to allocate demand, the order book may eventually surpass even the developed market record, when six years ago Verizon drew $100BN of orders for a record-breaking $49BN corporate bond sale.

 

And while Aramco said it was seeking to raise about $10 billion from the sale (it remains unclear why when the company earn over 10x each year), according to the kingdom’s energy minister as Saudi Arabia combines the oil producer with chemical maker Saudi Basic Industries Corp, the likely proceeds will be far greater thanks to what may soon be 10x oversubscription.

 

As a reminder, Aramco is turning to the dollar bond market as the company raises cash ahead of the purchase of a $69 billion majority stake in domestic petrochemical giant Sabic. The bond sale represents an alternate way for Saudi Arabia to raise money and diversify from oil after an IPO of Aramco was postponed last year. Saudi Arabia has valued Aramco at a whopping $2 trillion, though not all investors are convinced it’s worth that much.

 

Ironically, if the underwriters allowed every order to be filled, the entire transaction could be funded today with the $85 billion in already committed orders!

 

Where it gets even more ironic, is that Saudi Aramco’s treasurer has told investors that the company does not need to raise the money, because of its “fortress-like corporate position”, and is focused solely on opening up the historically secretive group to public investors for the first time. In other words, Aramco is doing international creditors a favor by issuing $10 billion in debt (which may end up trading at a lower yield than Saudi Arabia itself).

As the FT notes, "the bond sale is intimately tied to Saudi Crown Prince Mohammed bin Salman’s vision to open up the desert kingdom’s economy to the wider world, after his grander plan of listing a stake in Aramco on stock markets faltered." And in what is certain to infuriate the world's liberal elites, "neither banks nor investors have been deterred from taking part in the high-profile deal despite displays of outrage over the death of Jamal Khashoggi, the journalist, in the Saudi consulate in Istanbul last year."

And here is the peak irony: the Riyadh conference in October, dubbed “Davos in the desert,” was boycotted by several prominent business leaders — including Jamie Dimon, the chief of JPMorgan Chase, which is now leading the Aramco bond sale.

And speaking of what price the bonds price at, the Saudi state-backed oil company is marketing the new bonds at a yield in line with Saudi government bonds. As borrowers typically look to tighten pricing levels before the close of a bond sale, it suggests that Aramco is targeting a cheaper cost of borrowing than the Saudi government, which may deter at least some buyers, although with $85 billion in committed orders, their caution will hardly be noticed.

Meanwhile, since rating agencies rate Aramco in line with the Saudi government, in the single A bracket, the oil company has told investors that Moody’s would have given it a top-notch triple A rating, if it were a standalone company, as it produces enough cash each year to cover its debt many times over.

 

In other words, in today's bizarro world, Aramco has a higher credit rating than the United States

 

https://www.zerohedge.com/news/2019-04-09/85x-oversubscribed-aramcos-bond-offering-greeted-record-85-billion-orders

Anonymous ID: 96d882 April 9, 2019, 4:46 a.m. No.6106927   🗄️.is đź”—kun   >>6989 >>7235

>>6106900

the ridiculous thing about this is they ,saudi's, increase the reserve amounts every year by the production rate. At least they used to. So they never have a meaningful draw down in reserve capacity. I never thought this would come to market as it would force them to be transparent-however it seems they are still not being that way. Due diligence is a bitch until it isn't. Also look at where oil prices have gone n last few weeks, nothing but up. Makes it moar attractive-for them.

>They are not going to miss out on making a ton of money due to something as fleeting and fickle as principles.

and there it is in a nutshell.

Anonymous ID: 96d882 April 9, 2019, 5:08 a.m. No.6106995   🗄️.is đź”—kun

Rally Fizzles, Futures Drift As Trump Opens New Trade War Against Europe

 

The global equity rally stumbled for the second day, and risked running out of steam ahead of Wednesday's action-packed event bonanza, even as Asian and European shares gained while US equity futures pared losses as investors appeared to shrug off threats from President Trump for new tariffs on goods produced in the EU in retaliation for Airbus subsidies. Treasuries were unchanged, as the dollar drifted lower.

Amid a generally muted tone, Asia rose to an 8-month high overnight with European shares initially opening flat after the office of the U.S. Trade Representative sent its proposals to the World Trade Organisation, saying the EU had provided $11 billion worth subsidies to Airbus; however the Stoxx Europe 600 inched higher in morning trade, up 0.1%, with the banking sector rising before the ECB meeting Wednesday, overshadowing losses in the tech sector, led lower by SAP.

 

In notable moves, SAP fell 2.5% after being downgraded to hold from buy at HSBC, cut to neutral from buy at UBS ahead of the software company’s 1Q results later this month. Airbus shares dropped as much as 2.5 percent in early deals, with many of its key suppliers lost between 0.7 percent and 1.2 percent, though much of the early losses were then recovered.

While most Asian markets were higher, Chinese stocks dipped modestly, down 0.2%, but it was the ongoing surge in Chinese 10-year sovereign yields that continues to grab attention, with the paper rising another 4bps to 3.294%, the highest level of the year following a torrid surge last week, when yields jumped 19bps, the most since November 2013.

Market Snapshot

 

*S&P 500 futures down 0.1% to 2,894.75

*STOXX Europe 600 up 0.09% to 387.85

*MXAP up 0.3% to 163.34

*MXAPJ up 0.4% to 543.47

*Nikkei up 0.2% to 21,802.59

*Topix down 0.09% to 1,618.76

*Hang Seng Index up 0.3% to 30,157.49

*Shanghai Composite down 0.2% to

3,239.66

*Sensex up 0.3% to 38,800.85

*Australia S&P/ASX 200 up 0.01% to

6,221.82

*Kospi up 0.1% to 2,213.56

*German 10Y yield fell 0.9 bps to -0.002%

*Euro up 0.08% to $1.1272

*Brent Futures up 0.2% to $71.26/bbl

*Italian 10Y yield rose 0.8 bps to 2.132%

*Spanish 10Y yield fell 0.6 bps to 1.081%

*Brent Futures up 0.2% to $71.26/bbl

*Gold spot up 0.3% to $1,301.75

*U.S. Dollar Index down 0.1% to 96.95

 

US Event Calendar

 

6am: NFIB Small Business Optimism, est. 102, prior 101.7

10am: JOLTS Job Openings, est. 7,550, prior 7,581

 

https://www.zerohedge.com/news/2019-04-09/rally-fizzles-futures-drift-trump-opens-new-trade-war-against-europe

https://www.kitco.com/charts/livegold.html

https://www.dailyfx.com/crude-oil

 

Oil 'rally' appears to have lost steam. Just as they have announced the offering is 8.5X over-subscribed. Lather, rinse, repeat.

Anonymous ID: 96d882 April 9, 2019, 5:34 a.m. No.6107108   🗄️.is đź”—kun   >>7157 >>7439 >>7481

Euro zone banks expect to ease business loan standards in second-quarter - ECB

(back to fog a mirror qualifying standards)

 

FRANKFURT (Reuters) - Euro zone banks expect to ease standards for business loans and consumer credit as competition remains fierce and demand slows in Italy and Spain, a European Central Bank survey showed on Tuesday.

 

With economic growth slowing and recession fears rising, ECB policymakers recently approved a new set of ultra-cheap loans to commercial banks, fearing they would halt the flow of credit, exacerbating the downturn.

 

But the results of the survey suggest that banks are not planning to make it any harder for businesses to get loans, blaming high competitive pressure.

 

“For the second quarter of 2019, banks expect an easing of credit standards for loans to enterprises and consumer credit, and a further tightening of credit standards for housing loans,” the ECB said.

But credit demand cooled among consumers and companies in Spain, where general elections will be held this month, and from businesses in recession-struck Italy.

For the euro area as a whole, banks expect net demand for housing loans, consumer credit and business loans to rise in the three months to June.

Credit standards — banks’ internal guidelines or loan approval criteria — and terms and conditions on new credit remained broadly unchanged, the survey showed.

Italian banks, however, said they were tightening lending terms for a second straight quarter, blaming a higher cost of funding and a heightened perception of risk.

Borrowing costs for the Italian government, which drive the cost of funding for banks, have risen since a populist coalition took power last year and disclosed plans to run higher budget deficits.

https://www.reuters.com/article/uk-ecb-policy-lending-idUKKCN1RL0SJ