Saudi Arabia’s sovereign wealth fund is primed to choose international banks to lend it $11bn, filling the hole left by the delayed listing of state energy group Saudi Aramco and providing financing for crown prince Mohammed bin Salman’s ambitious economic reforms. The loans will be the first made to the Public Investment Fund, the vehicle used to drive the young prince’s vision for an economy less dependent on oil, which has placed bold bets on electric car maker Tesla, ride-hailing app Uber and space travel company Virgin Galactic.
The loans are particularly important for the fund after plans to list Saudi Aramco, from which it was due to receive proceeds, were postponed indefinitely. Riyadh’s focus has shifted away from the blockbuster IPO, which had been expected to raise in the region of $100bn, in favour of other means of financing for the PIF. Some of the most senior names in international banking, including JPMorgan’s Jamie Dimon, Morgan Stanley’s Franck Petitgas and Goldman Sachs’s Dina Powell, the former Trump White House official, have been actively pitching for the deal.
The PIF had hoped to raise up to $8bn, but one person close to the deal said the loan was oversubscribed and likely to be set at $11bn with a spread of 75 basis points over Libor, commonly used as a floating rate benchmark. One banker involved said: “Everyone has gone in fairly aggressively.”
Syndicated loans to sovereign wealth funds are unusual, with large Middle Eastern funds such as the Qatar Investment Authority typically borrowing against specific investments instead. As many as 16 banks are expected to participate in the syndicated loan, with the lead banks to be selected late on Thursday, people involved in the process said.