The first bonds out of the door, from Luxembourgian SPV EIG Pearl Holding (EIGPRL), are illustrative for what can be expected. EIG Energy Partners and BlackRock Real Assets’ USD+25bn lease-lease-back financing transactions for Saudi Aramco’s pipeline networks are starting to test out bond markets for capital to repay bank bridges.
EIGPRL was met with subdued demand, potentially reflecting a weak public market appetite to provide leverage for private investors in fossil transactions, and/or some queasiness around subordination in practice of transaction bonds versus Aramco’s own bonds.
The lease-lease-back transactions are a way to provide Aramco with upfront cash to pay dividends and for direct investors such as EIG and BlackRock Real Assets to get access to long-term fossil infrastructure exposure.
It will be interesting to see the “ESG” treatment of these type of bonds, noting that at least one investor has already put EIGPRL bonds in their ESG fund, as well as the continuing positioning of fossil gas as “green.” One technical dimension of this is whether EIGPRL is deemed to be an Aramco risk or not, in which case the bond might be excluded from certain investors mandates.