Bloomberg Agency and the Wall Street Journal revealed that the Saudi Public Investment Fund, headed by the Crown Prince Mohammed bin Salman (MBS), raised a $17 billion loan to repay an existing facility that’s due to mature next year.
The $620 billion Public Investment Fund raised the seven-year loan from a syndicate of 25 banks in Europe, the US, the Middle East and Asia, it said in a statement.
The borrowing, which was twice oversubscribed, will be used to repay an existing $11 billion loan that was raised in 2018.
The Largest-Ever Deal
The loan marks the largest-ever deal for general corporate purposes raised by a borrower from the Middle East, according to Bloomberg data.
It is also the second-biggest corporate loan globally this year after a $17.05 billion working capital facility for Walmart Inc.
The new loan also aligns well with the PIF’s medium-term capital raising strategy as well as its 2022 Annual Capital Raising Plan, according to a PIF statement.
The PIF, a key lever for the kingdom’s efforts to diversify the economy away from oil, has emerged as a global investor over the past few years as it pursues the goal of increasing its assets to about $1 trillion by 2025. It’s funded through a mixture of borrowing, cash and asset transfers from the government, and retained earnings from its investments.
The PIF, as the Saudi fund is known, has been borrowing to finance overseas acquisitions and invest in domestic projects even as soaring crude prices are set to give the kingdom its first budget surplus in almost a decade. In October, it raised $3 billion from its debut green bond sale that also marked its first foray into ethical finance.
An unprecedented Liquidity Crisis
Saudi Arabia’s central bank has stepped up the use of a mechanism to pump money into the financial system as it looks to tackle a liquidity crunch that has helped push borrowing costs for lenders to the highest in decades, according to people familiar with the matter.
Unusually for a period of high oil prices, Saudi banks are facing a shortage of liquidity. A rapid rise in lending that’s not been matched by deposit growth has left banks clamoring for funding.
Meanwhile, an expected influx of government deposits from soaring crude receipts has not materialized and a previous central bank liquidity injection provided only temporary relief.
Fitch Ratings warned this month that lending growth risks decelerating next year if the central bank doesn’t step in with further liquidity support.
Unusually for a period of high oil prices, Saudi banks are facing a shortage of liquidity.
