JPMorgan & Chase Co. is set to earn more than $100 million on a recent trade tied to the sale of a stake in Saudi Aramco’s oil pipelines, a windfall that stands out even in the sprawling interest-rate swap market, people familiar with the matter said.
The bank is poised to book gains on a hedging transaction with U.S. investment firm EIG Global Energy Partners LLC, which agreed last month to invest $12.4 billion in the pipelines, the people said. JPMorgan advised Aramco on the deal and was one of two banks that helped it arrange a loan of more than $10 billion offered to the buyers, the people said.
Given the size of the financing, EIG separately entered into a so-called swap deal with JPMorgan to guard against fluctuations in interest rates. JPMorgan is in line for the nine-figure profit after markets moved in its favor, according to the people, who asked not be identified discussing sensitive information.
While buyers in an acquisition this size normally turn to a group of lenders to manage their financing risk, JPMorgan was the sole bank on the hedging transaction, the people said. The size of the return was commensurate with the risk the bank took onto its books as counterparty on the swap, one of the people said.
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