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Aramco Bond Sale Analysis Assignment

This document provides a group assignment to analyze reasons for the falling profits of Saudi Aramco, the need to raise $8 billion in debt, and decisions around dividend distributions. It includes 6 questions to critically examine factors such as the profit decline, debt issuance, dividend policy, and Saudi government influence as the majority stakeholder. Students are also asked to analyze details of Aramco's 5-part bond deal including spreads, maturities, and the underwriter's role.

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Anushree Pareek
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6 views1 page

Aramco Bond Sale Analysis Assignment

This document provides a group assignment to analyze reasons for the falling profits of Saudi Aramco, the need to raise $8 billion in debt, and decisions around dividend distributions. It includes 6 questions to critically examine factors such as the profit decline, debt issuance, dividend policy, and Saudi government influence as the majority stakeholder. Students are also asked to analyze details of Aramco's 5-part bond deal including spreads, maturities, and the underwriter's role.

Uploaded by

Anushree Pareek
Copyright
© All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PDF, TXT or read online on Scribd

Group Assignment – II

Group Assignment: 5 marks

Due for Submission: To be informed later.

[Link]

[Link]
aramco-kicks-off-jumbo-bond-sale

[Link]
from-five-part-bond-deal-2326622

Based on the above news articles, Critically analyze the followings and comment:

1. Explain the reasons for the fall in profits of the Saudi firm Aramco.
2. Explain the reasons for the need of raising debt of USD8 billion.
3. As paying dividends is not an obligation, what could be the reasons to distribute
dividends even when the company reserve is not sufficient?
4. As the Saudi government is the major beneficiary (more than 98% stake), the
government may go for printing money to fund the investment needs. Then why the
government is forcing the firm to declare dividends?
5. The firm may opt for a single tranch (one maturity date). What could be the reasons for
a five-part dollar deal (five tranches maturing in three, five, ten, thirty, and fifty years)?
6. Aramco sold USD500 million in three-year bonds at 110 basis points over U.S
Treasuries (UST), USD1 billion in five-year bonds at 125 bps over UST, USD2 billion
in 10-year notes at 145 bps over UST, USD2.25 billion in 30-year bonds at 3.3 per cent
and USD2.25 billion in a 50-year tranche at 3.55 per cent, the document showed.
a. Explain the reason for the increase in the spread as the bond maturity increased.
b. Explain the reasons for raising less capital by issue of short-term bonds and
more capital by issuing long-term bonds.
7. Citi, Goldman Sachs, HSBC, JPMorgan, Morgan Stanley, NCB Capital were hired as
active book runners. Explain the responsibility of the bond underwriter.

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