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Bruised bankers seek consolation prizes after shelved Aramco IPO

September 01, 2018

DUBAI/LONDON: Investment banks which lost out on big payouts for the work on the shelved listing of oil giant Aramco are lining up for a raft of other projects as Saudi Arabia pursues reforms.

Banks including JPMorgan and Morgan Stanley worked for months to prepare what would have been the biggest ever stock market debut.

But the plan to sell 5 percent of the company for a targeted $100 billion was pulled.

The bankers were paid retainer fees but were expecting around $200 million would be shared among all the banks involved when the deal was done.

Now, they are pinning their hopes on other projects from a privatisation programme that is part of Riyadh´s economic reform plan to loosen its reliance on oil.

Without the funds from the Aramco sale, the government is looking to raise money in other ways, creating new opportunities for the banks, bankers say.

Teams from JP Morgan and Morgan Stanley that worked on the IPO, have been shifted to advise on Aramco´ planned acquisition of up to $70 billion in petrochemicals firm Saudi Basic Industries (SABIC), three people familiar with the details of the transaction told Reuters.

HSBC, which was also an adviser on the Aramco IPO, is expected to play a role in putting together the debt to fund that purchase, they said. One of the sources said the issue could exceed the 2016 sovereign bond issue of $17.5 billion, which was a record for the kingdom.

Aramco said earlier this month it was in "very early-stage discussions" with the kingdom´s Public Investment Fund (PIF) to acquire the stake in SABIC but has not said how it will finance the deal.

Spokespeople for JP Morgan, Morgan Stanley and HSBC declined to comment on their role in the Sabic deal.

None of those banks have confirmed they were involved in the Aramco IPO. Other deals are expected to be forthcoming.

"The PIF (sovereign wealth fund) has had to reconsider its budget in the last three months, after finding out that they wouldn’t be getting $100 billion from the Aramco IPO right away," said a banker in Saudi Arabia. "So there’s been a flurry of activity as they look to raise cash in other ways. A lot of these are smaller deals, $1 billion here and there, but all geared toward financing their commitments for big infrastructure projects without slowing down their timelines.