Saudi Arabia’s PIF said to seek bridge loan of up to $8bn

Saudi Arabia’s sovereign wealth fund has started preliminary talks with banks to raise a loan expected to be between $5bn and $8bn as it seeks funding for new investments to diversify the kingdom’s economy.

The Public Investment Fund, or PIF, is looking for a bridge loan that will be fully underwritten by lenders and would be repaid with proceeds from the $69.1bn sale of its stake in Saudi Basic Industries Corp. to Saudi Aramco.

Talks with banks are still at an early stage and the final size of the loan will depend on their response.

A spokesman for the PIF said its funding strategy includes “four sources of finance, including capital injections and asset transfers by the government, retained investment returns, and loans and debt instruments.” He declined to comment further.

PIF is a central part of the government’s effort to wean the economy away from oil under a plan known as Vision 2030. The fund aims to control more than $2 trillion by that date and currently has assets of about $290bn, according to data from the Sovereign Wealth Fund Institute.

Last year, it raised $11bn from a group of international banks in its first ever borrowing.

Saudi Aramco, the world’s largest oil company, this week debuted in the international capital markets to fund part of the Sabic acquisition, issuing $12bn of bonds. Aramco will pay for half of the Sabic stake when the deal closes this year and the rest over the subsequent two years.

The deal between the three government-owned entities – where the kingdom’s sovereign wealth fund sells its 70% stake in Sabic to Aramco – moves money from one pocket of the state to another and helps provide funding to the PIF that was expected to come from the initial public offering of the state oil company.

 

This edited article first appeared in Arabian Business.

 

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