DUBAI (Reuters) – Saudi Aramco has asked banks to extend for one year a $ 10 billion loan it raised last May, two sources familiar with the matter said, suggesting that the rebound in crude prices may not not pushing the oil giant to reduce its debt yet. .
The sources confirmed a report from Loan Pricing Corporation, a fixed income information provider owned by Refinitiv.
It is at the discretion of the banks to extend the loan, but the lenders will likely agree in order to maintain a good relationship with Aramco in the hope of receiving future contracts, LPC said citing a banker.
One of the sources, who confirmed the report, echoed this, saying, “It’s Aramco. Why not?”
Aramco declined to comment.
LPC quoted a banker as saying that it was possible that Aramco was trying to push prices down by arguing that market conditions have improved since May, when oil prices were much lower and there was a lot uncertainty about the pandemic.
The loan started 50 basis points above LIBOR, a rate that rises as more money is drawn from the facility, one of the sources told Reuters, adding that Aramco may try to reduce prices from 10 to 15 basis points.
Brent crude futures settled at $ 66.13 per barrel last week. In May of last year, they were trading at around $ 30 a barrel, as global demand plunged due to the coronavirus crisis.
Sources told Reuters last year that Aramco would use the loan to support its acquisition of a 70% stake in Saudi Basic Industries Corp (SABIC) from the Saudi Arabia Public Investment Fund, an agreement of ‘worth nearly $ 70 billion.
LPC previously reported, citing a banker, that the loan would be repaid with the proceeds of a bond sale by the fourth quarter of 2020. This did not happen, although Aramco raised $ 8 billion. as part of a multi-tranche bond transaction in November.
Saudi Aramco’s profits fell last year, but they stuck to the promised annual dividend of $ 75 billion, most of which goes to the Saudi government.
HSBC said this month that Aramco’s outlook looks more positive and promising for 2021, hinting at lower net debt and a possible rise in dividends.