DUBAI (Reuters) – Orders for Saudi Aramco’s debut international bonds topped $100 billion on Tuesday, a record breaking vote of market confidence for the oil giant despite some investor concerns about government influence over the company.

State-owned Aramco is expected to raise more than $10 billion from the deal, which will be priced later on Tuesday and is seen as a gauge of potential investor interest in the Saudi company’s eventual initial public offering.

Before the six-part bond deal was marketed on Monday, Saudi Energy Minister Khalid al-Falih said initial indications of interest for the paper were over $30 billion.

Demand for the paper was the largest for emerging markets bonds since an orderbook value of more than $52 billion for Qatar’s $12 billion deal last year. It also surpasses the $67 billion in demand for Saudi Arabia’s inaugural issue in 2016.

“Purely on figures, it is a fantastic credit,” said Damien Buchet, CIO of the EM Total Return Strategy, Finisterre Capital.

But he added: “The thing is, they are part of Saudi Arabia, they are a government arm. For equity investors this is always going to be an issue, more so than for bond investors.”

The Aramco bond has attracted interest from a wide range of investors, as the oil producer’s vast profits would put its debt rating – if unconstrained by its sovereign links – in the same league as independent oil majors like Exxon Mobil and Shell.

The state-owned company has insisted on its independence while meeting investors ahead of the bond issue last week, saying the Saudi government remained committed to Aramco’s governance framework to safeguard its independence even when oil prices dropped.

But for some investors Riyadh’s control over the oil giant is an issue as its state ownership means decisions will ultimately be for the benefit of the government rather than investors.

“Aramco is more transparent, has stronger credit metrics and is on an improving ESG (environmental, social and governance) trajectory whereas the government is more complex,” said Mohieddine Kronfol, chief investment officer of Global Sukuk and MENA Fixed Income at Franklin Templeton Investments.

“The link between the two however is understandably very strong,” he said.

NO PREMIUM

Previously reluctant to do so, Aramco last week opened for the first time its books to investor scrutiny, showing it is by far the most profitable company in the world.

Having made core earnings of $224 billion last year and with $86 billion in free cash flow at the end of 2018, Aramco does not need to borrow.

Initial indications of over $30 billion in investor demand – before the bonds were actually sold – prompted Aramco to market the notes with almost no premium to Saudi government debt.

“They are clearly trying to price it (the bond) off existing AA corporates in this world, so people are looking at curves like Shell, Total, Exxon but also technology giants like Apple,” said Buchet.

The issue follows on the heels of Aramco’s planned $69.1 billion acquisition of a 70 percent stake in petrochemicals firm Saudi Basic Industries Corp (SABIC) from the Saudi sovereign wealth fund, a deal that many see as a transfer of government funds aimed at boosting the Saudi Crown Prince’s economic agenda.

“This bond is being issued for two reasons: to establish Aramco’s status as an independent corporate identity and to enable the transfer of wealth out of the company,” said Marcus Chenevix, analyst, MENA and global political research at TS Lombard.

Aramco, however, said the bond issue was not linked to the SABIC acquisition, which will be paid in tranches through internal cash flow and, potentially, other resources.

Many see the deal as a relationship building exercise with international investors ahead of its planned initial public offering, scheduled for last year and then postponed to 2021.

The bonds are divided into tranches of three, five, 10, 20 and 30 years. The offering also includes a three-year floating rate bond.

Aramco has hired Lazard as financial adviser for the bond deal. JPMorgan, Morgan Stanley, HSBC, Citi, Goldman Sachs and National Commercial Bank have been chosen to arrange the bond issue.

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