Fitch Revises Outlook on Public Investment Fund to Positive; Affirms at ‘A’

Fitch Ratings has revised the Outlook on Public Investment Fund’s (PIF) Long-Term Foreign- and Local-Currency Issuer Default Ratings (IDR) to Positive from Stable and affirmed the IDRs at ‘A’.

The Positive Outlooks reflect that on the sovereign. A full list of rating actions is below.

PIF is a traditional sovereign wealth fund and the leading strategic investment arm of Saudi Arabia, promoting the diversification and development of Saudi Arabia’s non -oil sector under the government’s “Vision 2030” strategic agenda.

PIF’s strategic objectives are closely aligned with national economic objectives. The fund’s total assets at end-2020 were 47.1% of national GDP.

The rating actions follow the revision of the Outlook on Saudi Arabia’s Long-Term IDRs to Positive from Stable on 14 April 2022.

Fitch classifies PIF as a government-related entity under its Government-Related Entities Rating Criteria (GRE). “We link PIF’s ratings to the Saudi government, based on the assessment of the strength of linkage with and incentive to support by the Saudi Arabia; warranting an equalisation of its ratings with those of the sovereign. Consequently, PIF’s ratings and Outlook are sensitive to any action on the sovereign ratings.

As PIF is in its early growth phase, its outstanding debt is low and is net cash positive, resulting in a very strong financial profile. This makes the prospect of financial distress remote, which we also believe the state has a strong incentive to avoid, given the impact it would have on international financial markets and the borrowing capacity of the state or other Saudi GREs.

International scale credit ratings of Sovereigns, Public Finance and Infrastructure issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of three notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from ‘AAA’ to ‘D’. Best- and worst-case scenario credit ratings are based on historical performance.