The Public Investment Fund (PIF) has raised USD 2 billion from debt markets to finance its domestic investment plans.
What
A banking document revealed on Tuesday that the PIF issued three-year sukuk worth USD 1.5 billion along with 8-year green bonds worth USD 500 million.
So what
The three-year sukuk are priced at 75 basis points over US Treasuries (UST), while the green bonds were set at 107 basis points above UST.
This followed massive purchase orders on the debt sales, which exceeded USD 4.7 billion for the Sharia-compliant bonds and USD 3.4 billion for the green ones.
The document noted that proceeds from the sukuk sale will be allocated for general fund purposes, while the green bond sale will finance eligible clean energy projects, according to Reuters.
Some context
This marks the fund’s fourth international debt issuance this year. The first issuance, which PIF pulled the trigger on in January, was worth USD 5 billion.
The second one came a month later, was dollar-denominated, and garnered USD 2 billion.
PIF completed its third international bond issuance last June, raising GBP 650 million (USD 850 million).
PIF also recently refinanced a USD 15 billion syndicated bank loan at the end of last month. It is also working on listing some of its subsidiaries on the Saudi stock exchange to benefit from IPO proceeds.
Now what
PIF has been increasingly focused on its local investments recently as it looks to diversify the national economy away from oil. It is also investing in new strategic sectors such as semiconductor manufacturing, electric vehicles, and tourism.
PIF is looking to increase its domestic spending from around USD 40–50 billion annually to over USD 70 billion after 2025.
Pascal Bode, an analyst at Morgan Stanley, noted in a research report that the fund’s financing needs for 2024 are USD 22 billion. This is less than half of what has been raised through bond sales since the beginning of 2024.
The PIF might rely on borrowing in the future if foreign direct investment or oil prices do not see an uptick soon, according to Bode.
