Bankers shrug off risk and head back to Saudi Arabia for deals

For the second straight year, the risks of doing business in Saudi Arabia are pushing their way onto the agenda of Saudi Crown Prince Mohammed bin Salman’s glittering investment showcase.

The elites of global finance are descending on Riyadh from Oct. 29, days after Saudi Aramco delayed its on-again off-again initial public offering in the wake of a missile attack that crippled its biggest oil processing facility. The company is pushing to complete the sale this year after international money managers’ skepticism at its touted $2 trillion valuation.

The timing of the three-day Future Investment Initiative — an annual jamboree that showcases the kingdom’s ambitions — is crucial for Saudi Arabia. It will be the most visible display that it’s business as usual after Wall Street boycotted the 2018 event following the murder of government critic Jamal Khashoggi. The A-list attendees this year include scores of chief executives, such as Citigroup Inc.’s Mike Corbat and BlackRock Inc.’s Larry Fink — both no-shows last year.

Middle East practice head at Eurasia Group, a consultancy. “Wall Street executives appear more willing to engage given the importance of Saudi Arabia to their business. Aramco is one factor, but a broader set of considerations are at play. Of course, the kingdom still has to demonstrate that its modernization plans can progress and attract foreign capital.”

Hot Deals

Senior executives from many of the 25 banks working on Aramco’s mammoth deal — which could see advisers sharing a fee pool of as much as $450 million — are set to attend next week’s meeting.

Credit Suisse Group AG’s CEO Tidjane Thiam, Citigroup’s top dealmaker Tyler Dickson and JPMorgan Chase & Co.’s head of global banking Carlos Hernandez — who led their banks’ pitches to Aramco and are actively involved in the deal — are to due attend the event, where Chairman Yasir Al-Rumayyan will host thousands of delegates alongside the crown prince. Deutsche Bank AG CEO Christian Sewing is also set to be there. He did not attend last year.

A formal agenda of speakers and delegates isn’t yet available on the FII website. Details of the attendees came from people with knowledge of the matter who asked not to be identified. The people said the plans weren’t final and may change.

Representatives for Deutsche Bank, Credit Suisse and Citigroup declined to comment. Representatives for JPMorgan didn’t immediately respond to requests for comment. A spokesman for the Public Investment Fund, which organizes the event, wasn’t immediately available to comment.

Deal Hype

The hype over deals in OPEC’s biggest oil producer masks a struggle to attract the long-term foreign direct investments needed to reduce the reliance on oil. While FDI more than doubled last year to about $3 billion, it remains well below the average level of the past decade. That’s in part due to uncertainty over the government’s economic plans and its human rights record — the crown prince sought to isolate neighboring Qatar in 2017 and the same year declared an alleged crackdown on corruption, which ensnared hundreds of the country’s billionaires and businessmen.

“This year the turnout will be higher but it will be more for fact finding and understanding deal potential,” said Richard Segal, a London-based senior emerging-markets analyst at Manulife Asset Management. “There are clearly post-Aramco deals to be done, but the question for them will be the length of the latest delay.”

Back to Business

Ken Moelis of Moelis & Co. and Vice Chairman Eric Cantor were two of a handful of Western bank executives that did show up at last year’s summit, which was held weeks after Khashoggi was murdered in the Saudi Consulate in Istanbul.

While the killing prompted a brief spell of skittishness over doing business with the kingdom, some of the world’s top banking executives, including Fink and then-HSBC Holdings Plc CEO John Flint, returned to Saudi Arabia in April for a two-day financial conference.

As well as the who’s who of finance, political figures such as U.S. Treasury Secretary Steven Mnuchin and Jared Kushner, a White House adviser and President Donald Trump’s son-in-law, plan to attend the forum after skipping last year. The CIA has concluded that Prince Mohammed ordered Khashoggi’s murder, according to the Washington Post.

“Politically, the U.S. will also send a big delegation to support Crown Prince Mohammad bin Salman,” said Eurasia’s Kamel. “It’s a way for the young prince to demonstrate his continued relevance despite the geopolitical risks facing his country.”

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