Saudi Real Estate Refinance Co (SRC) has issued 4 billion riyals ($1.07 billion) in a two-tranche private placement of Islamic bonds, or sukuk.
The issuance last week was SRC’s third in the local currency, but the first to be guaranteed by the Saudi finance ministry, Chief Executive Officer Fabrice Susini told Reuters in an interview on Monday.
SRC, which tripled its balance sheet over 2020, is also planning to issue sukuk denominated in U.S. dollars by end-2021 and has mandated four international and domestic banks to arrange an international issuance programme.
It will likely issue between $500 million and $1 billion in the third or fourth quarter, subject to negotiations with the finance ministry, which would also guarantee that paper, Susini said. The tenor will likely be 10-12 years.
“In terms of targets, I expect to … keep issuing domestically… internationally once we’ve started, and we’ll start before year-end, and we will probably open one or two other avenues to diversify our access to liquidity.”
The domestic issuance comprised a seven-year tranche of 1 billion riyals at 2.11% and 3 billion riyals in 10-year sukuk at 2.65%. It was 2.1 times oversubscribed. It was the first issuance guaranteed by the Saudi finance ministry since a 15 billion riyal sukuk issue by the General Authority of Civil Aviation in 2012.
SRC, modelled on U.S. mortgage finance firm Fannie Mae and owned by sovereign wealth fund PIF, is also considering issuing covered bonds and syndicated loans, Susini said.
The company will look to securitise a portfolio of loans, on the basis of which investors would be repaid under their investment, he said, adding it would be off SRC’s balance sheet.
Saudi Arabia exceeded its own target of 60% of its nationals to own homes by 2020. The target for 2030 is 70% from 62% at present. Susini said the mortgage market reached close to 500 billion riyals at the end of last year, just below the housing ministry target for 2020, despite the COVID-19 pandemic.
New mortgages in 2020 alone amounted to 130-140 billion riyals, up from 76 billion riyals in 2019 and around 30 billion riyals in 2018, he said.
The size of real estate financing relative to Saudi Arabia’s gross domestic product is 7-8%, Susini said, a relatively low ratio compared to other G20 countries.
Source Nasdaq