Riyadh skyline, Saudi Arabia.
The Saudi wealth fund has been busy picking up stakes in multiple global blue-chips, such as Citigroup and Boeing. But now, it could be taking up to a $10b loan. Image Credit: Pixabay

Riyadh: Saudi Arabia's sovereign wealth fund is planning to borrow about $10 billion by pledging some of its stakes in SoftBank Group Corp.'s technology investment vehicle.

The Public Investment Fund, which has been on an overseas acquisition spree recently, is speaking with investment banks about a margin loan backed by some of its investments in the $100 billion Vision Fund. While discussions with banks are ongoing, it may not materialize in a deal, and the fund may also decide against raising the loan.

PIF, the backbone of Saudi Arabia's economic transformation plan, is the largest contributor to the Vision Fund after committing $45 billion to invest along with SoftBank founder Masayoshi Son in companies such as WeWork, Oyo Hotels and Uber Technologies Inc.

"PIF is not planning, or even considering, a margin loan backed by its investment in SoftBank Vision Fund," the Public Investment Fund said in an emailed statement. "PIF has ample liquidity and has not been engaged with anyone to raise margin loans against its Vision Fund stake." (The Vision Fund, which contributed more than half of the conglomerate's profit a year ago, has swung to record losses.)

Buying into blue-chips

PIF's investment drive has seen it build stakes in some of the world's largest companies since the start of the coronavirus pandemic. On Friday, it disclosed stakes in companies including Facebook Inc., Boeing Co. and Citigroup Inc.

The fund is looking into "any opportunity" arising from the economic wreckage of the crisis, its governor, Yasir Al-Rumayyan, said at a virtual event in April. The fund expects to see "lots of opportunities," he predicted at the time, citing airlines, energy and entertainment companies as examples.

The fund reassigned staff to find bargains to broaden its global portfolio, people familiar with the plan have said. The investments disclosed in a quarterly filing Friday amount to a bet that marquee names of the corporate world will rebound as many facets of life return to normal.

PIF has targeted some of the companies hit hardest in the crisis, including cruise operator Carnival Corp. and hotel owner Marriott International Inc. It's also broadened its natural resources exposure with stakes in Suncor Energy Inc. and Canadian Natural Resources Ltd, according to the filing, which outlined investments in nearly $10 billion worth of US equities.

Cash against stakes

Simultaneously, the recent plunge in oil prices is pushing some sovereign wealth funds in the region to find ways to unlock liquidity. The move by PIF follows a similar plan by Qatar's sovereign wealth fund to raise 7 billion euros ($7.6 billion) against some of its most high-profile European equity investments.

"PIF has four major sources of funding - capital injections from the government, transfer of government assets, loans and debt instruments to take advantage of the capital markets, and retained earnings from investments," the PIF said in its statement. "As such, PIF may utilize various sources opportunistically to optimize its capital."

Saudi Arabia drops exposure in US Treasuries
Abu Dhabi: Saudi Arabia’s investments in US Treasury bonds declined in March by $25.3 billion on a monthly basis. At the end of the month, it totaled $159.1 billion compared with $184.4 billion in February.
On a year-on-year basis, these dropped 6.4 per cent - or $10.9 billion – against the $170 billion Saudi Arabia held in March 2019.
Saudi Arabia ranked 12th on the list of biggest investors in US bonds as of end March. Japan topped with $1.27 trillion, followed by China ($1.081 trillion). Regionally, Saudi Arabia came first, followed by Kuwait, whose investments in US bonds declined in March to $40.1 billion against $43.6 billion in February.
Third-placed was Iraq at about $30.7 billion, while UAE’s declined to $28.03 billion compared to about $37.3 billion in February.

- Samir Salama, Associate Editor