September 4, 2018 / 10:58 AM / 2 months ago

Saudi’s PIF to sign US$11bn loan next week

LONDON, Sept 4 (LPC) - Saudi Arabia’s sovereign wealth fund, Public Investment Fund (PIF), is set to sign a US$11bn syndicated loan next week, according to bankers close to the deal, which will help to fund the kingdom’s economic transformation plans.

The deal will be the first commercial loan for PIF, which is tasked with helping to deliver Saudi Arabia’s Vision 2030 reform plan, as the country reduces its reliance on oil exports. The loan will have a five-year maturity and is structured as a club loan with 14-16 banks making commitments of up to US$1bn at three different levels.

“I anticipate we will receive signing instructions next week,” one banker said.

The deal has been largely self-arranged by PIF, which has held bilateral negotiations with each lender, the banker said. It will be used for general corporate purposes, sources told Reuters in July.

“We were summoned to Saudi around four weeks ago for one to one meetings – it is exciting for banks”, a second banker said.

Banks joining the deal will not know which other banks are in the group until they receive the final loan documentation to sign, the banker said.

PIF did not immediately respond to an emailed request for comment.

PLAN B

The loan follows Saudi Arabia’s postponement of plans to list state oil giant Aramco, which was expected to raise around US$100bn.

Aramco is now looking at buying a strategic stake in petrochemcial firm Sabic from PIF, which could be worth up to US$70bn.

The loan is seen as an essential relationship-building exercise to win further business with the government, which started its economic move away from hydrocarbons in 2016.

“It’s the first deal for the sovereign wealth fund and it cements our relationship with the kingdom,” the second banker said. PIF received commitments of up to US$20bn from banks eager to lend to net lucrative ancillary business and finally settled on the US$11bn figure after scaling back banks’ commitments, the bankers said.

The loan pays a margin of 75bp, with additional fees of around 60bp-70bp for the lead banks.

PIF was originally looking for a US$6bn-$8bn loan, Reuters reported in July.

The banks lending to PIF are expected to be similar to lenders to a US$16bn loan for the Kingdom of Saudi Arabia (KSA) that was signed in March.

“The understanding is that the bank group and size (for PIF) will be very similar to the kingdom’s US$16bn loan - this is a government relationship-driven deal, the first banker said.

“We expect it (PIF) will be a carbon copy of what KSA has done in its last two financings,”the second banker said.

Saudi Arabia’s last loan closed on March 19 and comprised a US$8.35bn term loan and a US$7.65bn murabaha financing.

HSBC, JP Morgan and MUFG were coordinators, bookrunners and mandated lead arrangers on the deal with Bank of China, Citibank, Credit Agricole, ICBC, Mizuho Bank, Standard Chartered and SMBC as bookrunners and mandated lead arrangers.

BNP Paribas, Goldman Sachs, Societe Generale joined as mandated lead arrangers and Bank of America Merrill Lynch, Deutsche Bank and Morgan Stanley acted as lead arrangers, according to LPC data.

Top tickets for KSA’s US$16bn loan were US$1.425bn, whereas the top ticket for PIF’s loan will be around US$1bn, the first banker said. (Editing by Tessa Walsh)

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