The Saudi Public Investment Fund (PIF) has revealed plans to issue three tranches of dollar-denominated bonds, contributing to the increasing trend of emerging market issuers tapping into debt markets early in the year. According to IFR, a capital markets insight provider, the Saudi sovereign fund has already received subscriptions surpassing $20 billion for the benchmark-sized triple-tranch bonds announced on Monday, Reuters reported.
Read more: Saudi’s PIF to raise $3.5 bn from sukuk sale
Initial pricing instructions from PIF indicates that the 5-year bond will offer a spread 150 basis points above U.S. Treasury bonds, the 10-year bond at 175 basis points above. The second tranche proposes a price guidance of 175 basis points above U.S. Treasuries for its 10-year bonds. Additionally, these bonds come with a three-month par-call provision. Meanwhile, the third option indicates a spread of 235 bps over the same benchmark for its 30-year option. According to documents published by Reuters, Citi, Goldman Sachs International, and J.P. Morgan have been appointed as joint global coordinators for the bond offerings.
PIF as an economic growth catalyst
PIF plays a crucial role in Saudi Crown Prince Mohammed bin Salman’s strategy to diversify the economy and reduce dependence on oil revenues. Also, it serves as a long-term strategic investment fund, maintaining financial independence in its investments and operational activities. It acts as a catalyst for economic growth, contributing to the non-oil GDP and making domestic and international investments across various sectors. Fitch Credit Ratings and Moody’s have both affirmed the Fund’s credit rating at ‘A+’ with a ‘stable’ outlook.
With $718.04 billion in assets under management as of September 30, PIF has raised tens of billions of dollars through various means, including debt markets. These funds are being utilized to support a massive investment program aimed at creating new industries, generating employment opportunities, and promoting expansion both domestically and internationally through investments and joint ventures.
These bond sales have caught the interest of higher-rated sovereign funds. For example, Mexico conducted its largest-ever sale of $7.5 billion in early January. Similarly, Poland, Hungary, and Indonesia have been actively involved in the market. Additionally, at least five other countries, including Indonesia, Poland, Türkiye, Israel, and Mexico, are expected to issue bonds worth at least $10 billion. Mexico’s bond issuance, in particular, is projected to reach $18 billion.
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