ICBC chosen as bookrunner for Saudi Arabia’s US$11 billion syndicated loan

Saudi Arabia plans to raise US$11 billion from a syndicated loan in what would be the biggest financing deal in Europe, the Middle East and Africa this year, as the kingdom seeks to finance its ambitious investment plans.

The kingdom’s Ministry of Finance has appointed Industrial and Commercial Bank of China as coordinator and bookrunner for the long-term senior, unsecured loan, according to people familiar with the matter. The 10-year debt is offering an interest rate of 100 basis points over the Secured Overnight Financing Rate – the usual reference rate when borrowing in dollars, the people said, asking not to be identified because the matter is private.

ICBC, as the Chinese lender is known, has invited other banks to participate in the loan and has asked interested parties to respond before mid-October, the people said. It is not immediately clear what the loan will be used for, although the kingdom has a slew of projects in the pipeline as part of a diversification drive championed by Crown Prince Mohammed bin Salman.

While part of that will be funded by oil revenue, the government also needs to attract foreign investment and borrow. Many key bodies investing in Vision 2030 projects, including the Public Investment Fund and its subsidiaries developing the new city of Neom, have already borrowed tens of billions of dollars.

A representative for the Ministry of Finance did not immediately respond to requests for comment outside of office hours on Friday. A representative for ICBC was not immediately available to comment.

A deal by the kingdom would boost EMEA’s syndicated loan market, which has suffered a 27 per cent drop year-to-date, according to Bloomberg data. It also highlights the increasing use of Chinese lenders in the Middle East. The rankings of major Chinese banks such as Bank of China and ICBC have risen in league tables of loan arrangers every year since the pandemic, according to the data.

ICBC has this year jumped seven spots to 11th in a table of bookrunners for Middle East loans, while BOC climbed four spots to 13th place, the data shows.

Saudi Arabia is in talks to raise the funds after its budget deficit widened in the second quarter as the government raised spending on social benefits and projects meant to diversify its economy. A series of oil production cuts and lower prices may lead the kingdom’s economy to contract this year. In July, the International Monetary Fund gave the kingdom the steepest growth downgrade among major economies for this year.