September 19, 2019 / 1:43 PM / a month ago

Saudi Real Estate Refinance Co plans up to 1 bln riyal sukuk -CEO

RIYADH, Sept 19 (Reuters) - Saudi Real Estate Refinance Co (SRC), the Saudi equivalent of U.S. mortgage finance business Fannie Mae, is planning an up to 1 billion riyal ($267 million) sukuk this year and a potential U.S dollar debt issue next year, its CEO told Reuters.

SRC, a subsidiary of Saudi Arabia’s PIC sovereign wealth fund, aims to boost housing construction - a top priority of Saudi Arabian economic reforms - by injecting liquidity into the real estate market.

It is preparing to issue a sukuk, or Islamic bonds, to back the purchase of home loan portfolios from mortgage financing companies and banks.

“We’re planning to issue before year-end, probably in the magnitude of 750 million to 1 billion riyals,” said CEO Fabrice Susini.

“What’s to be determined is whether it will be with a guarantee of the Ministry of Finance.”

Susini was referring to a guarantee agreed in May to help reduce the cost of funding for the company.

SRC is also considering issuing its first international sukuk, possibly in the first half of next year, he added.

The initial sukuk will probably have a maturity of seven to 10 years, he said.

In March SRC raised 750 million riyals through sukuk of various maturities under a programme that allows it to raise up to 11 billion riyals through local-currency Islamic bonds.

Saudi Arabia’s housing ministry aims to increase activity in real estate as part of its 2030 reform plan to diversify the economy away from oil.

“We keep working with banks to address our short and medium-term refinancing needs,” said Susini. “We don’t rule out a medium-term syndicated loan, which may present benefits for us at some point.”

The kingdom wants to increase home ownership to 60% by 2020 and 70% by 2030 as part of the housing goals attached to the Vision 2030 reform programme promoted by Crown Prince Mohammed bin Salman.

SRC has a target of refinancing at least 10% of the mortgage market in Saudi Arabia by 2020 and 20% by 2028.

Reporting by Marwa Rashad, Davide Barbuscia and Hadeel Al Sayegh Editing by David Goodman

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