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Saudi Arabia’s Public Investment Fund (PIF) has attracted only tepid interest in plans for its latest multibillion-dollar debt sale, banking sources say, suggesting the kingdom is losing its appeal for some lenders.
International banks have flocked to join the efforts of the the Middle East’s largest economy to reduce its reliance on oil and have continued to seek Saudi business despite Riyadh’s relations with Western allies being tested by the murder last year of journalist Jamal Khashoggi.
The Saudi government has raised nearly $60 billion in global bonds since 2016, as well as a $16 billion international loan, with a string of state entities also joining the debt bonanza, including this year’s $12 billion bond issue from oil giant Saudi Aramco.
Though banks have queued up for relatively low-earning Saudi sovereign bonds and loans in the expectation this would lead to more lucrative work, postponement of Aramco’s planned stock market listing and a slow start to a slate of other planned privatizations have left some lenders disappointed.
“Banks had been made a lot of promises, on the equity side mostly, and what is happening is just sovereign borrowing,” said one banker with an international lender.
Having raised $11 billion through a syndicated five-year loan last year, PIF is in talks with international banks for an expected $8 billion offering to be paid back within one year from the sale of the sovereign fund’s 70% stake in petrochemicals company SABIC to Aramco.
“Banks already participated in the (PIF) term loan, so they’re hesitant to also participate in the bridge loan if it’s not at commercial terms and more about relationship lending,” said another banker who is familiar with the matter.
Some large banks, such as HSBC and Citi, will participate, the sources said, meaning the deal is likely to get done. But the waning interest indicates that Saudi Arabia may have to start paying higher rates for sovereign debt that is not a precursor to more profitable work.
source (TDS)
