Saudi sovereign fund seeks $10bn margin loan – Bloomberg News

[ajacobson]

Saudi sovereign fund seeks $10bn margin loan – Bloomberg News
By Reuters on May 17, 2020

Saudi Arabia's sovereign wealth fund plans to borrow about $10 billion by pledging some of its investment in SoftBank Group Corp's Vision Fund, Bloomberg News reported https://www.bloomberg.com/news/arti...oan-pledging-vision-fund-stakes?sref=DOTC0U32 on Saturday.





The report comes a day after the $300 billion Public Investment Fund (PIF) disclosed its stakes in major US companies including Boeing, Facebook and Citigroup .





The wealth fund is in talks with investment banks regarding a margin loan backed by some of its investments in Vision Fund, the report said, citing sources.





PIF's decision to pledge stake happens amid time when SoftBank's finances are being squeezed after a disastrous bet on co-working firm WeWork and souring portfolio bets on startups.





Softbank said last month it expected the $100 billion Vision Fund to book a loss of 1.8 trillion yen due to the worsening performance of its tech bets, which will tip the group as a whole into its first loss for 15 years.





PIF did not immediately respond to a request for comment.

 

[systematictrader]

So they wanna use the loan for what?

 

[RedDuke]

So they wanna use the loan for what?

they are 300 billion Godzilla, why they need 10 billion gorilla????

 

[maxinger]

for what purpose?
$10bn doesn't seem to be big sum if it is for covid related crisis.

 

[Nighthawk]

they are 300 billion Godzilla, why they need 10 billion gorilla????

Every good organized hedge fund is doing it. It´s called "capital efficiency". You don´t let portfolios values just "sit around". If you can get margin loan, you can increase your return on capital.

It´s what most ET member get from their friendly neighborhood broker called "InteractiveBrokers"...

And the creme the la creme is running real time P&L margin increases/decreases.....that is if you friendly Tier1 PB desk has appropriate pre trade/post trade checks in place.

 

[narafa]

That has nothing to do with capital efficiency. They realized that Softbank screwed them. They invested 10's of Billions of dollars in Softbank related portfolios and startups and they discovered that they have been ripped off big time, but too late.

This loan is an alternative to an exit from their investments. You can't get out, but you can get cash against those investments and just offload the risk to someone else.

They will be taking a major haircut on those Softbank investment valuations, so essentially, a $10B loan is probably collateralized by a portfolio which was worth at least $50B a year ago at the top, nice and decent 80% loss.

 

[zdreg]

you can get cash against those investments and just offload the risk to someone else.

In a margin loan the borrower still owns the collateral and has the risk of a decline in the value of the collateral. Where is the offload?

 

[kreskos]

Everyone has the right to make a mistake. It's a shame the truth is that in such sizes, but nothing can be done.

 

[narafa]

In a margin loan the borrower still owns the collateral and has the risk of a decline in the value of the collateral. Where is the offload?

Well, if done through an SPV, you can essentially default the SPV leaving the lenders with the collateral to recover their money.

 

[zdreg]

Well, if done through an SPV, you can essentially default the SPV leaving the lenders with the collateral to recover their money.

The same is true of a margin loan.