Saudi Aramco, which recently created a mergers and acquisitions division, has secured a $10bn standby credit facility with a consortium of international and local banks. With low oil prices pushing down the asset values of potential acquisitions, Aramco is taking advantage of cheap borrowing and its sound credit rating to build up a war chest, that would allow it to move swiftly to snap up opportunities as and when they arise. Other Mideast national oil companies (NOCs) are following Aramco’s lead though on a smaller scale.
The $10bn facility, which was secured at very favorable terms, replaces an existing $4bn credit line that has been in place since 2010. Aramco signed the revolving credit agreement with 27 financial institutions, including local banks, in both US dollar and Saudi Riyal denominations consisting of five-year and one-year renewable facilities at between 10 and 12 basis points above Libor, the UK interbank offered rate, for the $7bn dollar-denominated loans, and at between 7 and 11 basis points above the Saudi Riyal Interbank Offered rate for the riyal-denominated tranche. (CONTINUED - 1209 WORDS)