Saudi Arabia’s sovereign wealth fund is planning to borrow about $10 billion by pledging some of its stakes inSoftBank Group Corp.’s technology investment vehicle to shore up liquidity, according to people familiar with the matter.
The Public Investment Fund, 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 $100 billion Vision Fund, the people said, asking not to be identified as the matter is private. While discussions with banks are ongoing, it may not materialize in a deal, and the fund may also decide against raising the loan, the people said.
The Saudi wealth fund didn’t immediately respond to a request for comment.
The move follows a similar plan by Qatar’s sovereign wealth fund to raise 7 billion euros ($7.6 billion) against some of its most high-profile European equity investments. PIF, the backbone of the oil-rich country’s economic transformation plan, is the largest contributor to the Vision Fund after committing $45 billion to invest along with SoftBank founder Masayoshi Son in companies such asWeWork, Oyo Hotels andUber 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.
The recent plunge in oil prices is pushing sovereign wealth funds in the region to find ways to unlock liquidity. 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 coronavirus pandemic. On Friday, it disclosed stakes in companies includingFacebook 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 predicted at the time, citing airlines, energy and entertainment companies as examples.
In a margin loan, a borrower secures the debt by pledging an asset with the understanding that they’d need to pay up if the value of the collateral declines. The lender can typically sell some of the collateral if the borrower is unable to provide the cash. Banks compete for these deals because of the fees associated with structured financing.
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