To raise funding as much a worth of $1.5 trillion in construction projects that are planned for the futuristic city, Saudi Arabia’s Neom is projected to debut its riyal bond sale later this year. Banks such as HSBC Holdings Plc and the securities units of Al Rajhi Bank and Saudi National Bank have been appointed by Neom to advise it on the sale of Islamic bonds known as Sukuk. The debt is said to be denominated in the local currency and is expected to raise an amount of 5 billion riyals ($1.3 billion). This was shared by an anonymous person asking not to disclose his identity as the information is private.
People who are closely associated with the matter said that the sukuk sale is expected to come early in the second half of the year. However the timing and size of sale will be determined, depending upon market conditions, they further added. Till now, most of the finance for the development has come in the form of equity injections from the owner, Saudi Arabia’s sovereign wealth fund led by Crown Prince Mohammed. But to start with the dreamy project, the developers have been on a search quite lately for new forms of cash.
A group of Saudi banks has recently lent a loan of 10 billion riyals to Neom, as stated by two people closely associated with the deal. The developers of the project have also raised a loan of 3 billion riyals to finance Sindalah, which is a magnificent tourism island in the Red Sea.
Earlier in July last year, Bloomberg had reported that Neom hoped to raise $2.7 billion worth of loan amount from local vendors. Till now, majority of its fundings has been received from the kingdom’s sovereign wealth fund. Earlier, it was expected that 1.5 million people would be living in the 170 km straight-line city by 2030. But Bloomberg has reported some time back that only 3,00,000 residents are expected to live in the space by that time.
What is Neom?
Neom is a commercial urban project which is being constructed in Saudi Arabia’s Tabuk. It was launched in 2017 by crown prince Bin Salman. The site is located at the northern tip of the Red Sea, east of Egypt across the Gulf of Aqaba and south of Jordan.
The project is expected to meet its renovation deadline in 2039. However there are doubts regarding the megaproject. Saudi Arabia had plans to complete major works of this project by 2020, and to complete the expansion by 2025. But it fell back and stalled the constructions. Only two buildings were ready by July 2022, while the rest remained in barren dessert. The project has been under various controversies, especially for environmental and human rights violations. Total area covered by Neom is 26,500 sq. kilometers and the corporation is completely owned by the Public Investment Fund and dedicates itself to developing the economic zone of Neom.