UPDATE 3-Saudi Arabia's PIF raises $7 billion in three-part bond sale

Investor demand strong despite regional instability, order books topped $20 billion

PIF shifts focus to domestic, revenue-generating investments under new five-year strategy

PIF sells bond in 3-,7-, and 30-year tranches

Adds final size and spread, analyst comment in paragraph 5

By Md Manzer Hussain

May 7 (Reuters) - Saudi Arabia's Public Investment Fund raised $7 billion in a three-tranche bond sale on Thursday, buoyed by strong demand, as the sovereign wealth fund returned to public debt markets to help finance the kingdom's economic diversification plans.

The sale comes as Saudi Arabia, the world's top oil exporter, seeks funding for large investment programmes and fiscal needs, even as the Iran war has disrupted energy markets and slowed regional dealmaking. The issue also tested investor appetite for Gulf debt amid heightened geopolitical tensions.

Investor demand was strong, with order books exceeding $20 billion, fixed-income news service IFR reported, allowing PIF to tighten pricing ahead of launch.

Final terms indicated that PIF sold a three-year $2.75 billion tranche at 95 basis points over U.S. Treasuries, a $1.75 billion seven-year portion at 105 bps and a $2.5 billion 30-year tranche at 135 bps, IFR said. The bonds had yet to be launched at 1700 GMT.


NEW STRATEGY

"(The) PIF needs to keep on raising to meet its domestic investment goals and given its very large international investments recently," said Justin Alexander, director at Khalij Economics and Gulf analyst at GlobalSource Partners.

"There seems to have been healthy demand amidst broad optimism both for Saudi Arabia and for PIF's new strategy."

The PIF, which manages close to $1 trillion in assets, is focusing investments across six key themes under a five-year strategy announced in April, with more capital directed domestically to support economic transformation under Saudi Arabia's Vision 2030 programme.

Officials have also signalled a shift away from costly "giga-projects" with uncertain returns towards revenue-generating sectors.

The PIF last tapped debt markets in January, raising $2 billion from a 10-year Islamic bond sale.

Citi, Goldman Sachs International, HSBC and J.P. Morgan were joint global coordinators for the latest issue.

Saudi Arabia reported a first-quarter budget deficit of 125.7 billion riyals ($33.5 billion) as it increased spending to support the economy amid disruption to energy supplies caused by the Iran war.


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