Saudi Arabia's Public Investment Fund has received more than $17.85 billion in demand for its debut bond sale, a bank document showed on Wednesday, in what will be the first green bond deal by a sovereign wealth fund, expected to raise billions of dollars.
The sovereign wealth fund, along with several European issuers, took advantage of a rare window of relative calm amid heightened volatility that has engulfed markets for much of the year. PIF will sell the green bonds in three tranches, including one with a tenor of 100 years, a first for a green bond and a sovereign wealth fund issuer.
Initial guidance was around 150 basis points over U.S. Treasuries for a five-year tranche, around 190 bps over UST for 10-year paper, and around 7%-7.25% for the 100-year bonds, which are expected to raise $500 million, the bank document showed.
The inclusion of the 100-year tranche was the result of investor enquiries, a source with knowledge of the deal said. Market watchers said the long maturity period showed the issuer's confidence.
Bank documents showed the five-year and 10-year tranches are expected to be of benchmark size, which typically means at least $500 million, but PIF is widely expected to raise more via the deal.
An update from the banks at 1212 GMT showed the five-year tranche got more than $9 billion in orders, the 10-year paper got over $7 billion and the 100-year notes got more than $1.85 billion. The deal is expected to close later on Wednesday. The fund, which manages more than $600 billion in assets and plans to grow that to over $1 trillion by 2025, is at the centre of Saudi Arabia's agenda to diversify the economy away from oil, spearheaded by Saudi Crown Prince Mohammed bin Salman.
PIF expects to invest more than $10 billion by 2026 in eligible green projects, including renewable energy, clean transport and sustainable water management, an investor presentation for the bonds showed.
PIF has said it would invest about $40 billion domestically each year through 2025, though it missed that target last year, investing roughly $22 billion.
Issuance of green bonds, from which proceeds are used to finance sustainable activity, has jumped in the past decade from $2.3 billion in 2012 to $511.5 billion last year, based on Refinitiv data.
"Issuance of green bonds appears to be accelerating which is welcome news for a region that has an important role to play in the global (energy) transition," said Dino Kronfol, Franklin Templeton's chief investment officer of global sukuk and MENA fixed income.
