Saudi Aramco is in early discussions with lenders for a loan of approximately $10 billion to help fund its purchase of a 70% stake in Saudi Basic Industries Corp (SABIC), according to a Reuters report.
Last year, Aramco agreed to buy SABIC’s majority stake from the Kingdom’s wealth fund for $69.1 billion, signing one of the world’s biggest chemical industry transactions ever.
The talks come at a time when oil-producing nations have been hit by a decline in demand and falling prices of crude oil as a result of the coronavirus pandemic.
“The financing would be for the SABIC deal, but the borrower is Aramco,” said one of the sources, adding that the discussions were at an initial stage, with the company sounding out banks.
“Ten billion dollars is where they want to get to, (it’s) not clear if, in this market, they’ll manage to reach that.”
A second source said banks involved in the talks included HSBC and JPMorgan, as well as lenders in the Gulf.
“The company continues to review its financial options as part of its normal course of business, while prudently preserving its pristine balance sheet and its resilience,” Saudi Aramco said in response to a Reuters request for comment about whether it was seeking such a loan.
JPMorgan declined to comment, while HSBC did not immediately respond to a request for comment.
A third banker said Aramco was looking to borrow in US dollars because it was cheaper than in Saudi riyals, in terms of interest, and to avoid pressuring Saudi banks’ liquidity.
The SABIC stake acquisition from Saudi Arabia’s Public Investment Fund (PIF) will help Aramco’s downstream expansion plans. The deal came after months of talks between the company and PIF and was one of the reasons for the delay of Aramco’s blockbuster initial public offering late last year.