NEOM reportedly considers debut riyal bond sale to fund projects

Image credit: Noppawat Tom Charoensinphon/ Getty Images

Saudi Arabia’s NEOM is reportedly considering its first riyal-denominated bond sale as the desert development looks for more sources of funding for the $1.5tn worth of construction projects it’s planned for the futuristic city.

The company has appointed banks including HSBC Holdings and the securities units of Al Rajhi Bank and Saudi National Bank to advise on the sale of Sukuk, according to a Bloomberg report.

The Islamic bond issuance, which could come as early as the second half of this year, is expected to raise as much as $1.3bn (SAR5bn).

Saudi Arabia’s Crown Prince and Prime Minister Mohammed bin Salman said in July 2022 that NEOM will be partly financed through an initial public offering that was expected this year.

The planned mega-city secured $5.6bn (SAR21bn) in financing and finalised contracts in June to develop its workforce’s first phase of housing expansion. It is expected to have a capacity for 450,000 people by 2026 and between 1.5 and two million people by 2030, eventually housing nine million by 2045.

The $500bn futuristic city emerging in the northwest corner of Saudia Arabia is progressing forward with several core developments including Norlana, THE LINE, Trojena, Oxagon, and Sindalah as infrastructure building unfolds across the region.

THE LINE, a pair of mirror-clad skyscrapers that Saudi Arabia hopes will ultimately stretch 170 km and house all of the city’s normal functions is the development’s signature project.

Saudi Arabia’s Public Investment Fund (PIF) is the cornerstone investor in NEOM, a 26,500-square-km high-tech development on the Red Sea.

The plans for a potential Sukuk sale come as the PIF has been considering plans to accelerate debt sales of its own and by its subsidiaries. The efforts to obtain more cash come as total spending by the sovereign fund is set to top $70bn a year by 2025, up from current levels of about $40 to $50bn a year.

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