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Will Aramco generate cash from financing supply chains?

Aramco supply chains

Saudi Aramco oil company intends to generate additional liquidity by financing supply chains, and bring billions of dollars to suppliers.

According to Wall Street Journal, Saudi Aramco, the third most profitable company in the world, is making several moves to generate liquidity.

Aramco financing supply chains

Wall Street Journal reported that Saudi Aramco has sent requests to banks and financial technology companies in recent weeks to prepare for companies a kind of liquidity program, known as supply chains financing.

The program is set to cover up to $2 billion in payments per month.

A spokesman for Aramco confirmed that the company is exploring the supply chains finance initiative, saying it wants to improve the experience of its suppliers.

The spokesman added that the process is at an early stage and that the company has not yet chosen the banks, according to the newspaper.

Aramco estimates it will pay between $500 million and $2 billion in supplier bills per month, according to documents the company sent to banks and seen by Wall Street Journal.

It is not possible to know who will bid for this business from among the big players in this field, led by Citigroup Inc. and JPMorgan Chase & Co..

It is noteworthy that Saudi Aramco a few days ago concluded a deal with a consortium led by EIG Global Energy Partners (EIG), one of the most prominent global investors in infrastructure in the energy sector. The deal aims at achieving the optimal value of its assets through a lease and re-lease agreement related to the Aramco’s pipelines network.

The sources said the consortium, whose name is not yet clear, would issue bonds to replace a $10.5 billion core financing package that Aramco has arranged for potential investors for a 49% stake.

Upon the deal completion, Aramco will receive proceeds estimated at about $12.4 billion, in order to enhance its financial position through one of the largest infrastructure deals in the global energy sector.

The sources also pointed out that the maturity date for the basic financing that supports the deal is for a period of 5 years that can be extended for another year. The sources expected that the first bond issuance will take place during the first quarter of 2022, and that the full refinancing will take place within two years.


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