Saudi Arabia is setting the stage for a remarkable financial maneuver with its sovereign wealth fund gearing up to issue a substantial three-year sukuk and a green bond set to mature in 2032. This strategic move underscores the Kingdom’s dynamic approach to investment and economic growth.
The three-year sukuk is strategically priced between 80 and 85 basis points above US Treasury bonds, while the green bond is positioned at 135 basis points. Typically, a benchmark-sized issuance refers to a minimum of $500 million, reflecting the ambitious scale of this endeavor.
The proceeds from these financial instruments will serve distinct purposes. The funds from the sukuk will address the general objectives of the wealth fund, whereas the green bond proceeds will be allocated to environmentally sustainable projects. This initiative highlights Saudi Arabia’s commitment to both economic expansion and ecological responsibility.
Esteemed financial institutions such as Goldman Sachs, HSBC Holdings, and JPMorgan Chase & Co. are at the helm as bookrunners for this ambitious issuance. This marks the fourth occasion the Public Investment Fund (PIF) has entered the bond market to bolster its extensive investment strategies, which include the development of giga-projects within the Kingdom.
Empowering Economic Diversification
In a testament to its financial prowess, the PIF raised $7 billion in 2023 through two dollar-denominated bond sales, alongside an additional $850 million from a sterling-denominated issuance. Furthermore, in August, the fund secured a $15 billion revolving credit facility from a diverse global syndicate of 23 financial institutions spanning Europe, the US, the Middle East, and Asia. This facility is initially set for three years, with the option to extend for up to two additional years, replacing a previous arrangement from 2021.
Loans and debt instruments are pivotal among PIF’s four funding sources, complemented by government capital injections, state asset transfers, and retained earnings from investments. The fund is at the forefront of Saudi Arabia’s strategic shift away from its historical reliance on oil, driving economic diversification with vigor.
A Record of Robust Growth
Since 2017, PIF has been instrumental in establishing 95 companies and injecting a minimum of SR150 billion ($39.97 billion) annually into the local economy. A report from KPMG in July highlighted that PIF’s total revenue soared by over 100 percent year-on-year in 2023, reaching SR331 billion.
PIF’s financial resilience is further evidenced by its impressive credit ratings, earning an A1 rating with a positive outlook from Moody’s and an A+ rating with a stable outlook from Fitch. These achievements underline the fund’s solid financial footing and its critical role in Saudi Arabia’s economic transformation.
