Investing

Saudi Arabia's sovereign wealth fund aims to tap debt markets twice this year after 'amazing' market response

Key Points
  • The Public Investment Fund (PIF) is seeking to raise debt over the coming months as part of a sustained effort to boost its firepower and help support the oil-rich kingdom's ambitious economic transformation plans.
  • Last month, Saudi Aramco received more than $100 billion in orders by April 9 for its debut bond sale — even after a prospectus said Riyadh would not guarantee Aramco's notes — but chose to sell only $12 billion.
An employee looks out from the 32nd floor viewing platform of the Al Faisaliah Tower in Riyadh, Saudi Arabia.
Simon Dawson | Bloomberg via Getty Images

Saudi Arabia's sovereign wealth fund is planning to tap the debt market twice this year, after an overwhelmingly positive response from international investors.

The Public Investment Fund (PIF) is seeking to raise debt over the coming months as part of a sustained effort to boost its firepower and help support the oil-rich kingdom's ambitious economic transformation plans.

"We asked for $8 billion syndicate loan and we got an amazing response from the markets. We got like $24 (billion)… That was sometime last year. This year, we will do at least two debt raises," Yasir Bin Othman Al-Rumayyan, managing director of Saudi Arabia's PIF, told CNBC's Hadley Gamble at the Milken Institute Global Conference in Los Angeles on Tuesday.

When asked how much he was expecting the fund to raise over the coming months, Al-Rumayyan said: "I think it's going to be in the neighborhood of like 14 billion Saudi riyal and for the U.S. dollar I think it's going to be north of $8 or $10 billion."

"And still, I mean, this doesn't represent even 5% of our AUM (assets under management). Our target is to go between 15% to 20%. So, we'll continue on raising debt," he added.

Relationship-building exercise

Last month, Saudi Arabia's state-controlled energy giant Aramco received more than $100 billion in orders by April 9 for its debut bond sale — even after a prospectus said Riyadh would not guarantee Aramco's notes — but chose to sell only $12 billion.

The first-ever debt issuance from Aramco sparked massive global interest, with the move offering investors greater visibility into the financial performance of the world's most profitable company.

Many saw the debt deal as a relationship-building exercise ahead of plans to list a portion of Aramco on international stock markets in about two years.

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No reason for Aramco IPO delay after SABIC deal finalized: Saudi PIF managing director

That's largely because Aramco's bond sale took place about six months after the murder of Jamal Khashoggi in the Saudi consulate of Istanbul. Intelligence agencies in the U.S. have since concluded the Saudi crown prince ordered the killing of Khashoggi.

Riyadh denies that Saudi Crown Prince Mohammed bin Salman was involved in the murder.

Khashoggi's killing sparked concerns that international investors would shun the kingdom, but bond buyers do not appear ready to overlook an investment opportunity in Saudi Arabia — the world's largest oil exporter.

No reason for Aramco IPO delay after SABIC deal finalized

Aramco's debut bond sale came shortly after Aramco's planned $69.1 billion acquisition of a 70% stake in petrochemicals firm Saudi Basic Industries Corp (SABIC) from the Saudi sovereign wealth fund.

Speaking to CNBC on Tuesday, PIF's Al-Rumayyan said the planned listing date of Aramco's initial public offering (IPO) in 2021 could yet be brought forward.

But, this could not happen before Aramco completed its bid for a majority stake in SABIC, he added.

"Once this transaction is closed I think there shouldn't be any reason for us to put Aramco IPO in a delay," Al-Rumayyan said.

— Reuters contributed to this report.

— Correction: This story has been updated to reflect the correct title of Yasir Bin Othman Al-Rumayyan.