Saudi sovereign wealth fund seeks margin loan

London

SAUDI Arabia's sovereign wealth fund is planning to borrow about US$10 billion by pledging some of its stakes in SoftBank Group Corp's technology investment vehicle to shore up liquidity, according to sources.

The Public Investment Fund (PIF), which has been on an overseas shopping spree recently, is speaking with investment banks about a margin loan backed by some of its investments in the US$100 billion Vision Fund, the sources said, adding that it's not yet a done deal. The Saudi wealth fund declined to comment on the margin loans.

PIF is in need of capital as it embarks on an investment spree that has seen it build stakes in some of the world's largest companies since the start of the Covid-19 pandemic. On Friday, it disclosed stakes in companies including Facebook Inc, Boeing Co and Citigroup Inc.

The fund is looking into "any opportunity" arising from the economic wreckage of the crisis, its governor, Yasir Al-Rumayyan, said at a virtual event in April. The fund expects to see "lots of opportunities", he said, citing airlines, energy and entertainment companies as examples.

Behind the scenes, as Covid-19 outbreaks disrupted commerce and drove stock prices to their lowest levels in years, the fund reassigned staff to find bargains to broaden its global portfolio, sources said. The investments disclosed in a quarterly filing on Friday amount to a bet that marquee names of the corporate world will rebound as many facets of life return to normal.

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PIF has targeted some of the companies hit hardest in the crisis, including cruise operator Carnival Corp and hotel owner Marriott International Inc. It's also broadened its natural resources exposure with stakes in Suncor Energy Inc and Canadian Natural Resources Ltd, according to the filing, which outlined investments in nearly US$10 billion worth of US equities.

Simultaneously, the recent plunge in oil prices is pushing sovereign wealth funds in the region to find ways to unlock liquidity. The move by PIF follows a similar plan by Qatar's sovereign wealth fund to raise seven billion euros (S$10.8 billion) against some of its most high-profile European equity investments.

PIF, the backbone of Saudi Arabia's economic transformation plan, is the largest contributor to the Vision Fund after committing US$45 billion to invest along with SoftBank founder Masayoshi Son in companies such as WeWork, Oyo Hotels and Uber Technologies Inc.

The loan could act as a way for PIF to raise money against its investments in the fund, which has been going through challenging times recently. The Vision Fund, which contributed more than half of the conglomerate's profit a year ago, has swung to record losses. BLOOMBERG