PIF-backed Saudi PROPERTY Refinance plans debut bond issue
02 December, 2020
Saudi PROPERTY Refinance Business (SRC) will tap international debt markets for a debut $500 million dollar-denominated bond early subsequent year, to fund the expansion of its loan book, its chief executive said.
The company, founded 3 years ago to aid a domestic industry for mortgage loans, will also tap the local sukuk market with a one-year, 10 billion riyals ($2.7 billion) guaranteed bond issue programme before its international foray, Fabrice Susini told The National.
“We will goal around $500m for the first international issuance, probably not below. It may be a lttle bit more. We'll see. It'll depend … on the problem in the market in those days,” Mr Susini said.
SRC is also likely to enter into the structured finance industry subsequent year, either through a securitisation of a few of its loan book or issuance of a good covered bond while the business looks to diversify its financing sources.
SRC was co-founded by the kingdom’s Public Expense Fund and the Ministry of Housing found in October 2017 to improve home ownership in the biggest Arab economy.
It generally does not lend right to end-users, but provides liquidity to the house loans market by buying mortgages from banks and other lenders, freeing them up to increase more loans to the sector.
Mortgage take-up rates were low by international expectations when the business was formed, with no more than 150,000-170,000 issued for a good country with an increase of than 30 million inhabitants, Mr Susini said.
PIF provided 5bn riyals found in initial funding, but the company has recently tapped local sukuk markets on a couple of occasions following the issue of its 750 million riyals ($220m) debut Islamic bond found in March last year.
SRC “probably underestimated” how much time it could take because of its product to become proven among banks and mortgage brokers, but because the second half of this past year the marketplace has witnessed “exponential growth”, Mr Susini said.
He cited mortgage financing numbers by the Saudi Central Lender, which showed the kingdom’s residential loans industry increased in benefit by 97bn riyals to about 312bn riyals by the finish of the third quarter of 2020, from about 215bn riyals at the end December 2019.
“So already in nine months … you increase by 40 % the inventory,” he said.
For days gone by 12 months, new home loan issues in the kingdom have fluctuated between 17,000-25,000 loans monthly. The central bank’s most recent amount for September was 27,889 loans, that was a 66 per cent year-on-year increase.
SRC's balance sheet reflects the surge by the finish of October, multiplying "a lot more than 3 x our total stability sheet deployment," Mr Susini said.
About 2.1-2.2bn riyals was deployed at the end of 2019, and by the finish of October this reached 6.5bn riyals.
Although a lot of its growth has been organic and natural, SRC spent 3bn riyals in July investing in a portfolio of mortgages from the kingdom’s Public Pensions Organization.
The deal showed there are “more players” in the kingdom which may have originated mortgages beyond the 11 primary banks, Mr Susini said.
“We are agnostic concerning who's originating these mortgages, given that it complies with the regulations ... our objective is normally to facilitate the process for originators," he explained.
“However the big driver ... the best bearing we have in mind may be the ultimate borrower, the Saudi citizen - ensuring they can access financing at the most competitive rate easy for a product that is best suited because of their situation.”
Source: www.thenationalnews.com
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