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Rating Action Commentary


FITCH AFFIRMS PUBLIC INVESTMENT FUND AT 'A+'; OUTLOOK STABLE

Mon 11 Nov, 2024 - 12:34 ET



Fitch Ratings - Warsaw - 11 Nov 2024: Fitch Ratings has affirmed Public
Investment Fund's (PIF) Long-Term Foreign- and Local-Currency Issuer Default
Ratings (IDR) at 'A+' with Stable Outlooks.

Fitch has also affirmed PIF's special-purpose vehicle (SPV) GACI First
Investment Company's guaranteed EMTN programme ratings and the senior unsecured
long-term ratings on its bonds at 'A+'. PIF's trust issuance programme, issued
through the trustee SUCI Second Investment Company (SSIC), has also been
affirmed at 'A+'. A full list of rating actions is below.





Fitch classifies PIF as a government-related entity (GRE) of Saudi Arabia
(A+/Stable/F1+) and equalises its ratings with those of the sovereign,
considering its significant role in diversifying the national economy.




KEY RATING DRIVERS

Support Score Assessment 'Virtually certain'



We view extraordinary support from Saudi Arabia to PIF as 'Virtually certain',
reflecting its maximum support score of 60 under Fitch's GRE Criteria. This
reflects a combination of responsibility-to- support and incentive-to-support
factors assessment as below.




RESPONSIBILITY TO SUPPORT

Decision Making and Oversight 'Very Strong'



Fitch views PIF as a critical long-term investment fund reporting to the Council
of Economic Development Affairs (CEDA) of Saudi Arabia. PIF operates with
financial autonomy under Royal Decree M/92, allowing it to execute its
investments and operations independently. In alignment with Saudi Arabia's
Vision 2030 and PIF's 2021-2025 strategy, PIF serves as a key economic catalyst,
driving non-oil GDP growth and investing in a diverse range of sectors both
locally and internationally. These investments include high-impact projects that
are strategically important to Saudi Arabia.

The robust oversight by CEDA ensures that PIF's strategic objectives and
operations remain aligned with national priorities. Fitch does not anticipate
changes in PIF's decision-making and oversight processes in the medium term.



Precedents of Support 'Very Strong'



The government has historically supported PIF with monetary and non-monetary
contributions, such as equity securities and land transfers. Significant
contributions in recent years include substantial cash transfers and shares of
Saudi Arabian Oil Company (A+/Stable; PIF directly and indirectly owns 16%). As
of 31 March 2024, the total contributions from the government amounted to
SAR1,308 billion or 36% of total consolidated assets. This active support is
mirrored at the Holdco level, with total equity funding comprising more than 90%
of total assets.

Fitch expects the government's very strong financial commitment to continue over
the forecast period, mainly though further asset transfers, which are likely to
bolster PIF's dividends base.




INCENTIVES TO SUPPORT

Preservation of Government Policy Role 'Very Strong'



PIF is central to Saudi Arabia's Vision 2030, aiming to diversify the economy
away from oil dependency by investing in various sectors, fostering sustainable
growth, job creation, and modernisation. PIF's high global profile and strategic
economic importance for the government mean its default would have severe
political and economic repercussions for the government.



Contagion Risk 'Very Strong'



As a high-profile GRE in Saudi Arabia, a default by PIF could materially impair
investor confidence in the sovereign's creditworthiness. This could in turn lead
to a significant increase in the cost of funding or external debt markets being
temporarily cut off for the sovereign. PIF continues to tap international
capital markets, notably through the EMTN and trust certificate issuance
programmes while receiving capital funding from the government during its growth
phase.




OPERATING PERFORMANCE



PIF's investments span multiple strategic sectors, including aerospace and
defence, automotive, real estate, entertainment, leisure and sports, metals and
mining, and utilities and renewables. In 2023, PIF focused on enhancing
operational efficiency through technological advancements and organisational
improvements. Investment projects are financed in balanced proportions through
operating income, government contributions, capital recycling, and debt capital
markets.

PIF experienced substantial growth in 2023, with total assets under management
(AuM) increasing by 29% to SAR2.87 trillion from SAR2.23 trillion at end-2022.
This was driven by strategic investments in various sectors, including the
launch of Diriyah Company, Riyadh Air, and Lifera, among others.




DERIVATION SUMMARY



Fitch views PIF as a GRE under its GRE Rating Criteria and equalises its ratings
with the sovereign's ratings, irrespective of its standalone assessment. This
reflects the 'Virtually certain' likelihood of support from the state, given
PIF's key role in KSA's strategic agenda. Fitch does not assess PIF's Standalone
Credit Profile, due to its very tight operational and financial links with the
government.




SHORT-TERM RATINGS



Under Fitch's GRE Criteria, when an entity's Long-Term IDRs are equalised with
the government's IDRs, the Short-Term IDRs are also equalised. We therefore
equalise PIF's Short Term IDRs with the Saudi sovereign's.




NATIONAL RATINGS



PIF's 'A+' Long-Term Local-Currency (LTLC) IDR corresponds to a 'AAA(sau)'
rating on the National Ratings Correspondence Scale for Saudi Arabia. In our
assessment, PIF's LTLC IDR is equalised with that of the sovereign.
Consequently, we did not apply any discount to the sovereign's National Rating,
which led to PIF's 'AAA(sau)' National Rating.




DEBT RATINGS



PIF's debt is rated in line with its IDRs. This comprises its wholly-owned GACI
First Investment Company's guaranteed EMTN programme, senior unsecured long-term
bonds under its EMTN programme and PIF's wholly owned SUCI Second Investment
Company's trust certificate issuance programme and senior unsecured sukuk under
the programme.




ISSUER PROFILE



PIF acts as the sole sovereign wealth fund of the Saudi government and its
public policy mission is to invest domestically and internationally to achieve
long-term returns to benefit national welfare. With the launch of the Vision
Realisation Programme under the Saudi Vision 2030 in 2017, PIF became the
leading strategic investment arm of the Saudi government, with consolidated
assets to GDP at 92% at end-2023. PIF's investment abroad accounts for 20% of
its portfolio, focusing in the US followed by Japan, India, Hong Kong, Spain,
France and China.




LIQUIDITY AND DEBT STRUCTURE



PIF demonstrates robust access to international financial and capital markets.
In 2024, it has continued to leverage debt capital markets by issuing USD5.5
billion and GBP650 million in bonds under its multicurrency EMTN programme,
along with an additional USD3.5 billion sukuk, reinforcing its strategic
capital-raising efforts. Additionally, PIF has secured a USD15 billion revolving
credit facility, which remains undrawn. This facility, established for three
years with a potential two-year extension, is supported by a syndicate of 23
international financial institutions.




RATING SENSITIVITIES


FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO NEGATIVE RATING
ACTION/DOWNGRADE



Negative rating action on Saudi Arabia would lead to similar rating action on
PIF.

A weaker assessment of overall government support factors, leading to a score
below 45 under our GRE Criteria.

Negative rating action on PIF's Long- and Short-Term IDRs would also be
reflected on GACI First Investment Company's guaranteed programme ratings and
senior unsecured foreign-currency long-term ratings and SSIC's trust certificate
issuance programme rating.




FACTORS THAT COULD, INDIVIDUALLY OR COLLECTIVELY, LEAD TO POSITIVE RATING
ACTION/UPGRADE



Positive rating action on Saudi Arabia would lead to similar rating action on
PIF, provided that our overall government support factors assessment are
unchanged.

Positive rating action on PIF's Long-Term IDRs would also be reflected on PIF's
SPV GACI First Investment Company's guaranteed programme ratings and senior
unsecured foreign-currency long-term ratings and SSIC's trust certificate
issuance programme rating.




ESG CONSIDERATIONS



Fitch does not provide ESG relevance scores for GACI First Investment Company,
PIF or SUCI Second Investment Company.

In cases where Fitch does not provide ESG relevance scores in connection with
the credit rating of a transaction, programme, instrument or issuer, Fitch will
disclose any ESG factor that is a key rating driver in the key rating drivers
section of the relevant rating action commentary. For more information on
Fitch's ESG Relevance Scores, visit
https://www.fitchratings.com/topics/esg/products




PUBLIC RATINGS WITH CREDIT LINKAGE TO OTHER RATINGS



PIF's IDRs are credit linked to the sovereign IDRs, while the ratings of the
bonds issued by GACI and SSIC are credit linked to PIF.




SOURCES OF INFORMATION



The principal sources of information used in the analysis are described in the
Applicable Criteria.




REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER RATING

The principal sources of information used in the analysis are described in the
Applicable Criteria.

RATING ACTIONS

Entity / Debt  

Rating  

Prior  


Public Investment Fund
LT IDR
A+ 
Affirmed
A+ 
 * 

ST IDR
F1+ 
Affirmed
F1+ 
 * 

LC LT IDR
A+ 
Affirmed
A+ 
 * 

LC ST IDR
F1+ 
Affirmed
F1+ 
 * 

Natl LT
AAA(sau) 
Affirmed
AAA(sau) 
SUCI Second Investment Company
 

 
 * senior unsecured

LT
A+ 
Affirmed
A+ 
GACI First Investment Company
 

 
 * senior unsecured

LT
A+ 
Affirmed
A+ 
 * senior unsecured

ST
F1+ 
Affirmed
F1+ 
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VIEW ADDITIONAL RATING DETAILS

Additional information is available on www.fitchratings.com


PARTICIPATION STATUS

The rated entity (and/or its agents) or, in the case of structured finance, one
or more of the transaction parties participated in the rating process except
that the following issuer(s), if any, did not participate in the rating process,
or provide additional information, beyond the issuer’s available public
disclosure.


APPLICABLE CRITERIA

 * National Scale Rating Criteria (pub. 22 Dec 2020)
 * Sukuk Rating Criteria (pub. 13 Jun 2022)
 * Public Policy Revenue-Supported Entities Rating Criteria (pub. 12 Jan 2024)
   (including rating assumption sensitivity)
 * Government-Related Entities Rating Criteria (pub. 09 Jul 2024)





ADDITIONAL DISCLOSURES

 * Dodd-Frank Rating Information Disclosure Form
 * Solicitation Status
 * Endorsement Policy


ENDORSEMENT STATUS

GACI First Investment Company EU Issued, UK Endorsed Public Investment Fund EU
Issued, UK Endorsed SUCI Second Investment Company EU Issued, UK Endorsed


DISCLAIMER & DISCLOSURES



All Fitch Ratings (Fitch) credit ratings are subject to certain limitations and
disclaimers. Please read these limitations and disclaimers by following this
link: https://www.fitchratings.com/understandingcreditratings. In addition, the
following https://www.fitchratings.com/rating-definitions-document details
Fitch's rating definitions for each rating s



Read More


SOLICITATION STATUS

The ratings above were solicited and assigned or maintained by Fitch at the
request of the rated entity/issuer or a related third party. Any exceptions
follow below.


ENDORSEMENT POLICY

Fitch’s international credit ratings produced outside the EU or the UK, as the
case may be, are endorsed for use by regulated entities within the EU or the UK,
respectively, for regulatory purposes, pursuant to the terms of the EU CRA
Regulation or the UK Credit Rating Agencies (Amendment etc.) (EU Exit)
Regulations 2019, as the case may be. Fitch’s approach to endorsement in the EU
and the UK can be found on Fitch’s Regulatory Affairs page on Fitch’s website.
The endorsement status of international credit ratings is provided within the
entity summary page for each rated entity and in the transaction detail pages
for structured finance transactions on the Fitch website. These disclosures are
updated on a daily basis.

International Public Finance
Supranationals, Subnationals, and Agencies
Middle East
Asia-Pacific
Latin America
Cayman Islands
Saudi Arabia


RELATED REGIONS

 * Saudi Arabia
 * Cayman Islands





ENTITIES

 * Public Investment Fund
 * GACI First Investment Company
 * SUCI Second Investment Company





ISSUER CONTENT

 * فيتش تثبّت تصنيف صندوق الاستثمارات العامة عند مستوى "A+‎" مع نظرة مستقبلية
   مستقرة
 * Public Investment Fund
 * فيتش تثبّت تصنيف صندوق الاستثمارات العامة عند مستوى "A+‎" مع نظرة مستقبلية
   مستقرة
 * Fitch Affirms Public Investment Fund at 'A+'; Outlook Stable
 * فيتش تصنّف برنامج الصكوك الأولي لصندوق الاستثمارات العامة عند مستوى "A+‎"
 * Fitch Rates PIF's Inaugural Sukuk Programme 'A+'
 * فيتش ترفع درجة تصنيف قدرة المُصدر على الوفاء بالالتزامات لصندوق الاستثمارات
   العامة إلى "A+‎" مع نظرة مستقبلية مستقرة
 * Fitch Upgrades Public Investment Fund's IDRs to 'A+'; Outlook Stable
 * Sovereign Wealth Funds Peer Review 2022





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FITCH RATINGS ANALYSTS

Maurycy Michalski, CFA
Director
Primary Rating Analyst
+48 22 103 3027
maurycy.michalski@fitchratings.com
Fitch Ratings Ireland Limited spolka z ograniczona odpowiedzialnoscia oddzial w
Polsce
Marszalkowska 107, 00-110 Warsaw

Konstantin Anglichanov
Senior Director
Secondary Rating Analyst
+49 69 768076 123
konstantin.anglichanov@fitchratings.com


Vladimir Redkin
Managing Director
Committee Chairperson
+44 20 3530 1514
vladimir.redkin@fitchratings.com



MEDIA CONTACTS

Athos Larkou
London
+44 20 3530 1549
athos.larkou@thefitchgroup.com

RATINGS KEYOUTLOOKWATCHPositiveNegativeEvolvingStable 

* Ratings displayed in orange denotes EU or UK Unsolicited and Non-Participatory
Ratings



Where there was a review with no rating action (Review – No Action), please
refer to the “Latest Rating Action Commentary” for an explanation of key rating
drivers



*Premium content is displayed in Fitch Red



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