Aramco seeks one-year extension on $10 billion loan: sources

The request for an extension is an indication that the recent rise in oil prices is not enough to pull the Saudi giant out of debt. 

While the bank may choose to reject Aramco's request, it is likely to agree in order to maintain a good relationship with the oil giant in anticipation of future business, according to a report by Loan Pricing Corporation.

Aramco have not commented on the loan extension request.

According to a banker who spoke to Loan Pricing Corporation, Aramco would seek to alter the terms of the deal, due to the fact that oil prices had not improved as expected with the start of coronavirus vaccine rollouts around the world. 

Last week, the price of a barrel of Brent crude was $66.13, up from the worrying lows of May 2020, when a barrel was valued at $30, as the world went into lockdown and demand tumbled.

The loan was to be used by Aramco to back its purchase of a 70% stake in Saudi Basic Industries Corp (SABIC) from Saudi Arabia’s Public Investment Fund, a deal worth almost $70 billion, according to sources who spoke to Reuters. 

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It was their intention that the loan would be repaid using funds raised from the sale of bonds, by the fourth quarter of 2020. This sale never happened, however Aramco was able to raise $8 billion in a multi-tranche bond deal in November.

The coronavirus pandemic caused Aramco’s profits to plunge last year, but it is expected that 2021 will see higher profits and a fall in debt held by the oil company. 

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