BlackRock-led investors in Aramco pipelines get ratings ahead of debt sales

BY Reuters | CORPORATE | 02/07/23 09:25 AM EST

By Yousef Saba

DUBAI, Feb 7 (Reuters) - Ratings agencies have assigned grades to the planned debt sale by investors in Saudi Aramco's gas pipelines network, led by BlackRock Inc (BLK), looking to refinance a multi-billion dollar loan that backed their stake purchase.

The refinancing will be done by issuing amortising bonds and sukuk, or Islamic bonds, ratings agencies said.

The consortium, which includes state-backed Hassana Investment Co., agreed to a $15.5 billion lease-and-leaseback agreement with Aramco in late 2021, which gives the investors a 49% stake in Aramco Gas Pipelines Co.

Reuters reported in September that BlackRock (BLK) held investor meetings in London to drum up interest in the planned bond sale.

"The issuer is expected to issue sukuk and conventional bonds to refinance a $13.4 billion bridge facility used as part of the issuer's acquisition of a 49% stake in AssetCo," Fitch Ratings said on Monday.

It assigned the issuers, GreenSaif Pipelines Bidco S.a.r.l. for the bonds and TMS Issuer S.a.r.l. for the sukuk, an expected issuer default rating of A, the same expected ratings for the bonds and sukuk.

Moody's Investors Service assigned them ratings of A1.

In a similar deal in 2021, Aramco agreed to a $12.4 billion deal to sell a 49% stake in its oil pipelines network to a consortium led by U.S.-based EIG Global Energy Partners.

The EIG-led investors in Aramco Oil Pipelines Co sold bonds in January to begin refinancing the $10.8 billion loan that backed the deal.

They raised $2.5 billion, falling short of a self-set target of $3.5-4.4 billion amid choppy markets. "The issuing entity name "GreenSaif" raises some questions in terms of linguistics," said Ulf Erlandsson, Chief Executive of Anthropocene Fixed Income Institute, in a research note.

"The SPV (special purpose vehicle) is set up under European Union jurisdiction, and the EU is increasingly querying the use of inappropriate ESG-related nomenclature in marketing financial instruments."

He said the carbon footprint of the bonds, which are not expected to be labelled "green", should be based on Aramco, which owns 51% of AssetCo, "as should determinations on index inclusions or exclusions". (Reporting by Yousef Saba; Editing by Arun Koyyur)

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

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