Saudi sovereign fund secures $11b loan

Kingdom’s first ever international loan aims to boost its diversification drive

RIYADH: Saudi Arabia's sovereign wealth fund said Monday it had secured its first ever international loan, boosting the kingdom's diversification drive after its flotation of state oil giant Aramco was stalled.

The Public Investment Fund said in a statement that it had obtained an $11 billion (€9.4 billion) loan as "the first step in its strategic, medium-term debt funding programme".

"We are pleased to have completed this international syndicated loan," the fund's managing director Yasir al-Rumayyan said.

The PIF had previously sought to raise billions of dollars through an initial public offering of shares in Aramco to fund projects that seek to reduce the kingdom's dependence on oil.

Diversification is a key focus of Crown Prince Mohammed bin Salman's Vision 2030 plan, which aims to transform the Saudi economy through a slew of projects from hi-tech start-ups to a new mega city.



But the Aramco IPO – once touted by Saudi officials as aiming to raise $100 billion – has hit the buffers, with executives at the oil giant citing unfavourable market conditions.

That prompted the PIF to turn to other sources to fund its programmes.

The fund said that under the Future Investment Initiative launched in October 2017, it aims to beef up its assets to $400 billion by 2020.

Its current holdings are estimated at $230 billion, mostly in the form of major stakes in companies including SABIC petrochemicals, Saudi Arabia's largest listed firm.

The PIF is in talks to sell its 70% stake in SABIC to Aramco for an estimated $70 billion as another way of raising cash.



The fund is aggressively pushing a host of big-ticket investments – from Uber to the planned $500 billion NEOM mega city on the Red Sea coast.

It has also invested in British tycoon Richard Branson's space tourism company Virgin Galactic and pledged tens of billions of dollars to funds run by SoftBank and Blackstone.

Since 2016, PIF has committed to investments worth $95 billion including stakes in high-risk tech firms such as electric car company Tesla, according to the International Monetary Fund.

After oil prices crashed in mid-2014, Saudi Arabia – the world's top crude exporter – accumulated budget deficits of more than $260 billion and borrowed over $100 billion to help finance the shortfall.

But the central bank still has around $500 billion in state reserves, bolstered by a recent partial recovery of oil prices. AFP