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Saudi Aramco in talks over $7.5bn loan to court oil pipeline Investors

The world's biggest oil producer has begun talks with lenders to secure favourable terms for the funding package say sources.

Saudi Aramco is reportedly lining up a loan of about $7.5 billion for potential investors in its oil pipelines, according to people familiar with the matter.

The world’s biggest oil producer has begun talks with lenders to secure favourable terms for the funding package that would then be offered to investors, the people said, asking not to be identified as the information is private. The discussions are occurring in parallel with the sale of a stake in a pipeline unit, which could raise about $10 billion for Aramco, the people said.

A pipeline deal would be the first phase of Aramco’s strategy to raise money by selling leasing rights or stakes in non-core assets, mirroring what Abu Dhabi National Oil Company (Adnoc) has done in the past few years.

The Saudi company is working with advisers including JPMorgan Chase & Co. and Moelis & Co., the Wall Street investment bank that’s also involved in the Adnoc deals.

Aramco declined to comment.

Adnoc, which pumps most of the oil and gas in the United Arab Emirates, has generated more than $15 billion from the likes of Apollo Global Management Inc., Brookfield Asset Management Inc. and Singapore’s sovereign wealth fund. The company sold shares in its fuel-retail arm and leasing rights for properties and natural-gas pipelines.

Aramco, which for years maintained only minimal corporate debt, is increasingly tapping new sources of funding as it looks to maintain annual dividend payments of $75 billion at a time of lower oil prices. Most of those payouts go to the Saudi state, which needs the money to fund its budget.

The company listed in Riyadh in late 2019, but is still 98 percent owned by the government.

The firm’s gearing, a measure of debt to equity, has risen to 21.8 percent, above its target range of 5 percent to 15 percent. Debt also rose because it took on loans to pay for a $69 billion acquisition of Saudi Basic Industries Corporation (Sabic) the chemical maker which is ranked among the world's largest petrochemicals manufacturers, last year.

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