As 1MDB scandal drags on in Malaysia, Goldman already chasing Saudi's Aramco IPO

Logo of Saudi Aramco is seen at the 20th Middle East Oil and Gas Show and Conference (MOES 2017) in Manama, Bahrain, March 7, 2017. — Reuters pic
Logo of Saudi Aramco is seen at the 20th Middle East Oil and Gas Show and Conference (MOES 2017) in Manama, Bahrain, March 7, 2017. — Reuters pic

KUALA LUMPUR, Sept 10 — US investment giant Goldman Sachs is a frontrunner to lead Saudi Arabia’s market offering of its state oil firm, Saudi Aramco, courtesy of a charm offensive since its role in the global 1MDB corruption scandal was exposed.

According to Bloomberg, Goldman is leveraging its senior executives’ expertise in courting Middle Eastern clients after the investment bank was forced to stay on the sidelines for initial public offerings worth at least US$25 billion (RM104 billion) while it shook off the effects of the 1MDB scandal.

People whom Bloomberg described as familiar with the matter told the business news outlet that Goldman’s top echelon has spent months to win over senior officials in Riyadh in an attempt to gain a role in what would be the world’s largest ever IPO.

“Saudi Arabia is a goldmine of potential investment banking revenues for Goldman Sachs in the Middle East,” Gary Dugan, chief executive officer of Singapore-based Purple Asset Management Pte, was quoted as saying.

“They will need success on Aramco to offset the door closing in their face in Abu Dhabi.”

In 2012 and 2013, the bank raised US$6.5 billion for 1MDB, much of which the US has alleged was ultimately stolen in a scheme masterminded by Malaysian fugitive Low Taek Jho or Jho Low, a central figure in the scandal who has denied wrongdoing.

Two former Goldman bankers have already been charged in connection to the case, with one, Tim Leissner, pleading guilty last year.

Malaysia is also suing Goldman for US$7.5 billion in the US over the bonds and previously rejected its offer of RM1 billion for an out-of-court settlement.

The US investment bank is also being sued by two Abu Dhabi investment funds over the scandal, effectively ruling out its participation in billions of regional IPOs.

Mubadala Investment Co, a central entity in the 1MDB scandal, publicly blacklisted Goldman Sachs this year and the US investment bank is purportedly being the subject of an informal snub by local lenders and state bodies.

The fallout has not ruled Goldman out in Saudi, however, with Bloomberg reporting that the bank has tapped former Donald Trump adviser Dina Powell to court Saudi Aramco.

Sources told Bloomberg that the Egyptian-born Powell returned to Goldman last year and was given the job of winning over large sovereign wealth funds.

Prior to her appointment, Powell reportedly had no banking experience and only obtained the necessary credentials this year.

The sources also described her as playing a key role in pitching for business using her deep connections in the Middle East.

When apologising to investors last year over the 1MDB scandal, Goldman chief executive David Solomon sought to present its role in the global corruption scandal as limited to “rogue” operatives.

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