Saudi Arabian sovereign wealth fund plans to borrow about $ 10 billion by promising part of its shareholdingsAccording to people familiar with the subject, the technology investment vehicle of SoftBank Group Corp. to consolidate liquidity.
The Public Investment Fund, which recently made purchases abroad, talks with investment banks about a margin loan backed by some of its investments in $ 100 billion Vision Fund, people said, asking not to be identified because the matter is private. While discussions with the banks are ongoing, they may not turn into an agreement and the fund may also decide not to increase the loan, people said.
The Saudi wealth fund did not immediately respond to a request for comment.
This decision follows a similar plan by the Qatar sovereign fund to raise 7 billion euros ($ 7.6 billion) against some of its most prominent European equity investments. The FIP, 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 with SoftBank founder Masayoshi Son in companies such asWeWork, Oyo Hotels andUber Technologies Inc.
The loan could enable PIF to raise funds against its investments in the fund, which has gone through a difficult period recently. The Vision Fund, which contributed more than half of the conglomerate’s profits a year ago, recorded record losses.
The recent drop in oil prices is pushing sovereign wealth funds in the region to find ways to unlock liquidity. PIF needs capital as it embarks on a wave of investments that have seen it acquire stakes in some of the world’s largest companies since the start of the coronavirus pandemic. Friday, he revealed stakes in companies, includingFacebook Inc., Boeing Co. and Citigroup Inc.
The fund is studying “any opportunity” arising from the economic wreckage of the crisis, said its governor, Yasir Al-Rumayyan, at a virtual event in April. The fund expects to see “many 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 while knowing that he will have to repay if the value of the collateral decreases. The lender can usually sell part of the collateral if the borrower is unable to provide the money. Banks compete for these transactions because of the fees associated with structured finance.