Saudi Arabia’s sovereign wealth fund has agreed initial terms for a $10bn loan from a group of the world’s largest banks, as Crown Prince Mohammed bin Salman’s favoured investment vehicle taps lenders for the second time in less than a year.
Bank of America Merrill Lynch, BNP Paribas, Crédit Agricole and Citigroup are among the 10 banks that have committed to provide the short-term loan to the kingdom’s Public Investment Fund, said people briefed on the transaction.
The loan is expected to be paid back towards the end of the year when Saudi Aramco makes the first payment to the fund of the $69bn it is paying the PIF for its majority stake in local petrochemicals group Sabic.
Having been earmarked by Prince Mohammed as the key vehicle for diversifying the economy, the PIF faces vast funding needs, including Neom, a $500bn scheme to develop a futuristic city on the northwestern coast of Saudi Arabia. It is also trying to establish new industries in sectors such as waste management and entertainment, alongside taking stakes in the likes of Tesla and Uber.
PIF is in “advanced discussions” over the loan, a person close to the fund said. PIF declined to comment.
HSBC, JPMorgan, Mizuho, MUFG, Standard Chartered Bank and Sumitomo Mitsui are the other banks participating, the people said. The process is now subject to ratification via formal requests for proposals that the PIF is scheduled to send the banks this week.
The international furore over last year’s murder of critical Saudi journalist Jamal Khashoggi is ebbing away, bankers say, despite a UN expert’s investigation last month concluding there was credible evidence that Saudi officials, including the crown prince, had been responsible for the killing.
“The issue is done now,” said one, pointing to the crown prince’s warm reception at the G20 summit of world leaders in Japan.
PIF has laid out plans to raise its assets under management from $300bn to $400bn by the end of the decade, and eventually hit $2tn by 2030. Such rapid growth may hinge on an initial public offering of state-owned oil company Saudi Aramco, a deal that had been put on hold last year but has since been revived following the company’s debut bond issuance in April.
Since coming under the crown prince’s control in 2015, PIF has lifted the proportion of international assets in its portfolio to 10 per cent from 1 per cent. The fund aims to raise its overseas holdings to a quarter in the medium term and reach an even split with domestic investments by 2035.
PIF is an anchor investor in Softbank’s $93bn Vision Fund, with a $45bn commitment, and bankers also expect the Japanese bank’s second tech fund to receive another Saudi investment.
The fund has said it would be opening offices in London and New York to help source overseas investments, and is currently searching for office space in London, the people said.
“The fund needs to deploy a lot of money, quickly,” said a banker briefed on PIF’s plans. The latest $10bn loan follows a debut $11bn loan last year.
With reporting by Andrew England