JPMorgan seeks to get rid of loans from Saudi and UAE sovereign funds | Financial markets


JPMorgan is trying to sell its exposure to sovereign wealth funds, anticipating further funding requests, sources told Reuters.

JPMorgan is looking to discount loans raised by sovereign wealth funds from Saudi Arabia and the United Arab Emirates, as banks brace for a surge of borrowing in the Gulf amid low oil prices, according to Reuters News Agency.

Banks tend to hold the loans they give to Gulf governments in their portfolios, only selling their exposure quietly through bilateral deals, as they don’t want to be seen as dumping paper in the market, have said two banking sources.

This helps them maintain good relationships with borrowers in light of future funding requests, but with the loans raised by oil-rich Gulf states generally trading at face value, there are also few incentives to other banks to buy them on the secondary market.

However, as the Gulf government and state entities seek to raise funds after the recent drop in oil prices and after the coronavirus pandemic strained budgets, banks have tried to make room for it. new loan requests by selling part of their exhibit, the two sources mentioned.

JPMorgan this week attempted to sell the loans it made to Saudi Arabia’s Public Investment Fund (PIF) and Abu Dhabi’s Mubadala, among a few other regional names, according to a loan document known as leaf ax, as seen by Reuters.

The bank planned to sell at least $ 50 million of PIF loan paper maturing in 2023 at an indicative price of 98.75 cents to the dollar, and at least € 70 million ($ 76 million) of Mubadala loans to 99 cents to the dollar, a document obtained by Reuters showed.

JPMorgan and Mubadala declined to comment, while PIF did not respond to a request for comment.


Other banks with high exposure to Gulf governments have also attempted to get rid of the loans in recent weeks, a Gulf-based source said.

“Everyone wants money these days and we can’t give everyone money,” the source said, speaking anonymously due to business sensitivities.

“Even if you put aside the current market environment, this is an area that has seen an increase in borrowing requests in recent years, so we need to make room.”

The source pointed out that the sale of the loans was not a sign of a change in the financial position of creditors, with repayments due in accordance with the agreements.

The PIF debt that JPMorgan is trying to sell is part of an initial $ 11 billion syndicated loan that the sovereign wealth fund raised in 2018 from 15 banks, including the US lender.

The Gulf states have borrowed tens of billions of dollars since the oil price collapse in 2014-2015, taking advantage of low global rates to bail out their oil-dependent coffers, with Saudi Arabia alone borrowing more than $ 100 billion in loans and bonds over the past few years. years.

“In general, this year you expect there will be a lot of demand for the region… so you make room before that,” the source said.

PIF – the investment fund at the center of Saudi Crown Prince Mohammed bin Salman’s plans to diversify the Saudi economy – raised an additional $ 10 billion loan last year.

Some banks were reluctant to participate in the deal given the low interest rate offered and their already significant exposure to Saudi entities, sources told Reuters.

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