Saudi wealth fund said to prepare to sign US$11 bil loan

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(Sept 12): Saudi Arabia’s sovereign wealth fund will sign an US$11 billion loan this week, marking its first-ever borrowing, according to people familiar with the matter.

Some of the biggest global lenders including Goldman Sachs Group Inc, HSBC Holdings Plc and JPMorgan Chase & Co are providing the loan that’s priced at 75 basis points over Libor, or just shy of 90 basis points, including fees, the people said, asking not to be identified because the information is private. 

London-based boutique Verus Partners is advising the Public Investment Fund (PIF) on the talks, the people added.

The deal will give the PIF additional cash after two years of major new investments. Last year, it announced plans to invest as much as US$45 billion in a technology fund run by Japan’s SoftBank Group Corp, put US$20 billion into a U.S infrastructure fund managed by Blackstone Group LP and build a US$500 billion city called Neom on the Red Sea.

Spokesmen for the PIF and Verus Partners declined to comment.

Future Deals

The debt is priced the same as a US$16 billion loan arranged by the Saudi government in March from a similar group of banks. The PIF started approaching banks in July, people familiar with the matter said at the time. The fund planned to establish a group of banks with which it would work on future deals, they said.

Morgan Stanley, Citigroup Inc, Standard Chartered Plc, BNP Paribas SA, Societe Generale SA, Mizuho Bank Ltd, MUFG, Credit Agricole SA, SMBC, Bank of America, Bank of China Ltd and Industrial & Commercial Bank of China Ltd also participated in the loan, the people said.

The PIF is willing to borrow to diversify the kingdom’s oil-dependent economy and boost returns from investments, Managing Director Yasir Al-Rumayyan said last year.

The fund hired former Bank of America Merrill Lynch Managing Director Alireza Zaimi as head of corporate finance and treasury last year, to work on its borrowing plans. It’s also in talks to sell its stake in chemical producer Saudi Basic Industries Corp to oil giant Saudi Aramco, which could raise as much as US$70 billion.

The PIF plans to become the world’s biggest sovereign fund, controlling more than US$2 trillion by 2030. It’s a central part of the government’s effort to diversify the economy away from oil, under a plan known as Vision 2030. Plans for an initial public offering of Aramco, which could have raised as much as US$100 billion for the PIF, are currently on hold.