Saudi Arabia’s Public Investment Fund has been awarded a first rating by Fitch and Moody’s as the government-owned $500 billion sovereign wealth fund prepares to extend credit facilities and increase debt government to fund its massive spending and investment commitments at home and abroad.
Fitch Ratings issued a PIF with a long-term default rating of A, with a stable outlook. Moody’s has assigned an A1 long-term benchmark credit rating. Both agencies issued their ratings based on the creditworthiness of the Saudi government, which owns the PIF and is very likely to back the sovereign wealth fund, if needed.
The ratings are a precursor to the fund that could launch ‘green bonds’ and expand $15bn in banking facilities as the PIF seeks to raise more debt, alongside tapping into the kingdom’s oil revenues, to finance ambitious Crown Prince Mohammed bin Salman’s national development plans that aim to plan for a future beyond oil.
“The PIF has become one of the kingdom’s main vehicles for developing the kingdom’s non-oil economy and reducing its reliance on the hydrocarbon sector,” Moody’s said. The PIF has been mandated to expand its assets, unlock new sectors for the country, bring cutting-edge technologies and build partnerships at home and abroad, he added.
Over the past five years, PIF’s assets under management have grown from $152 billion in 2015 to $412 billion in 2020. Moody’s said it expects the fund to continue growing in years to come. PIF’s current assets under management are estimated at approximately $500 billion.
Fitch said government cash injections into the PIF totaled $77 billion over the past three years. It has also received other grants such as land transfers for national investments.
These local investments, such as the futuristic city of Neom, made up 67% of the fund’s portfolio as of December 2020, Moody’s said. The fund has also launched an international acquisition campaign, investing in companies as diverse as electric vehicle maker Lucid Motors and Premier League football club Newcastle United.
“The rating reflects its stand-alone solvency. . . combined with a “very high” level of interdependence between the Kingdom and the PIF and a “very high” likelihood of extraordinary support being provided to the PIF by the Kingdom if ever needed,” he added.
The fund had an “excellent” liquidity profile, with net cash of $45 billion as of September 2021 and access to $15 billion in credit facilities, Moody’s said.
The wealth fund, which is chaired by Prince Mohammed, is a driver of the kingdom’s plan to diversify its economy beyond oil and achieve green goals, including net zero emissions by 2060.
“PIF sees the renewable energy sector as one of its strategic sectors and is committed to developing 70% of Saudi Arabia’s renewable energy target of 58.5 gigawatts by 2030,” he said. said Moody’s.
The heritage fund’s diversified portfolio meant that many of its investments had little exposure to environmental and social risks, Moody’s said.