Saudi SWF, Public Investment Fund (PIF), Raises Impressive USD7bn in Inaugural Syndicated Murabaha Credit Facility as Part of its Medium-term Fund-Raising Strategy
As far as debut credit facilities are concerned, the USD7bn raised by Saudi sovereign wealth fund (SWF), Public Investment Fund (PIF), on 6 January 2025 through an inaugural Murabaha Syndicated Facility is indeed impressive. PIF, the sixth largest SWF in the world with assets under management of an estimated USD925bn, raised the financing from a syndicate of 20 international and regional financial institutions as part of its medium-term capital raising strategy.
Indeed, PIF’s capital and fund-raising strategy encompasses capital injections from the Saudi, asset transfers from the government through SAMA, the central bank, retained earnings from investments, funds raised through issuance of conventional bonds, Green Bonds, Sukuk, conventional loan facilities, and now Murabaha credit facilities. No wonder Fahad Al Saif, PIF’s Head of the Global Capital Finance Division and Head of Investment Strategy and Economic Insights Division, is bullish about the newfound reach of the SWF’s funding strategy.
“This inaugural Murabaha credit facility,” he emphasised at the signing ceremony, “demonstrates the flexibility and depth of PIF’s financing strategy and use of diversified funding sources, as we continue to drive transformative investments, globally and in Saudi Arabia.”
Al-Saif is familiar with Islamic debt financing, Prior to his current position he headed the National Debt Management Centre (NDMC) at the Ministry of Finance, where he oversaw the Kingdom’s Annual Borrowing Plan, Calendar of local Sukuk Issuances, Local Saudi Sukuk Issuance Programme in Saudi Riyal, Global Medium Term Note Issuance Programme, and the Global Trust Certificate Issuance Programme. PIF fund raising thus far has been in Saudi Riyal and US dollar-denominated transactions. Saudi banking sources stress that PIF is also keen on issuing a Sukuk in the sterling market in 2025.
This financing complements PIF’s successful Sukuk issuances over the past two years including its maiden USD3.5bn Sukuk issuance in October 2023, and a USD2bn Sukuk in March 2024. It also underpins PIF’s strong financial position, as well as its approach to debt financing.
Under its stated Capital Markets Programme, PIF, rated Aa3 by Moody’s Investors Service with a stable outlook and A+ by Fitch Ratings, also with stable outlook, aims to become an active player in global debt markets and support the development of an active local market, where it can tap into either at will for short or long-term liquidity and with a broad range of instruments.
The programme also aims to hone its funding strategy and execution capabilities at both PIF and portfolio company levels thus making it easier for the SWF and its subsidiaries participate in global and local debt markets, thus instilling cash flow management discipline, and optimizing returns for PIF and its portfolio companies.
Big ticket conventional and Murabaha syndications are an established feature of the corporate and now the sovereign fund-raising sector in the Kingdom. Last April, for instance NEOM, a subsidiary of PIF overseeing a spate of giga projects including the futuristic NEOM City, secured a SAR10bn (USD2.67bn) revolving Murabaha credit facility precisely to support short-term cash flow requirements for the development of major projects including Trojena, THE LINE, Oxagon, and the luxury island destination, Sindalah. The lead arrangers for the transaction included Saudi National Bank, Riyad Bank, and Saudi Awwal Bank, with nine banks in total participating.
In addition, in August 2024, PIF secured a USD15bn conventional revolving credit facility from a consortium of international and local banks for general corporate purposes, replacing a similar facility agreed upon in 2021.
In an age of multiple growing international disclosure and transparency taxonomies, perhaps the Saudi SWF could be more forthcoming in this respect. Its disclosure for the USD7bn transaction merely gives a functional statement that it closed. It does not identify the consortium of participating banks, nor the tenor or any other final terms including pricing. This in contrast to the National Debt Management Center which publishes comprehensive final terms details of its monthly sovereign domestic Sukuk issuances and its occasional international Sukuk transactions.
According to PIF, the USD7bn Murabaha facility is expected to bolster its liquidity, supporting its expansive investments both locally and globally and further diversify its sources of funding under its medium-term capital strategy, ensuring flexibility, competitive financing terms, and risk mitigation – initiatives which are all aligned with the Kingdom’s Vision 2030 plan.