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Sun 17 May 2020 08:42 AM

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Saudi Arabia's sovereign wealth fund said to be seeking $10bn margin loan

Public Investment Fund is pledging some of its stakes in SoftBank Group's investment vehicle to shore up liquidity

Saudi Arabia's sovereign wealth fund said to be seeking $10bn margin loan

“PIF is not planning, or even considering, a margin loan backed by its investment in SoftBank Vision Fund,” the Public Investment Fund said in a statement.

Saudi Arabia’s sovereign wealth fund is planning to borrow about $10 billion by pledging some of its stakes in SoftBank Group Corp.’s technology investment vehicle, according to people familiar with the matter.

The Public Investment Fund, which has been on an overseas acquisition 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.

“PIF is not planning, or even considering, a margin loan backed by its investment in SoftBank Vision Fund,” the Public Investment Fund said in an emailed statement. “PIF has ample liquidity and has not been engaged with anyone to raise margin loans against its Vision Fund stake.”

PIF’s investment drive 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 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 predicted at the time, citing airlines, energy and entertainment companies as examples.

Behind the scenes, as coronavirus 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, people familiar with the plan have said. The investments disclosed in a quarterly filing Friday amount to a bet that marquee names of the corporate world will rebound as many facets of life return to normal.

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 $10bn 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.

PIF, the backbone of Saudi Arabia’s economic transformation plan, is the largest contributor to the Vision Fund after committing $45bn 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.

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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