Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

SRC is preparing to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market. (AFP)
Updated 23 April 2019

Saudi Real Estate Refinance Co. plans up to $1.07bn sukuk sale this year

  • The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios
  • SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year

RIYADH: Saudi Real Estate Refinance Co. (SRC), modelled on US mortgage finance firm Fannie Mae, aims to issue up to 4 billion riyals ($1.07 billion) of long-term sukuk this year, its chief executive said on Tuesday.

The plan by SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund, comes as it prepares to purchase more home loan portfolios from mortgage financing companies and banks to boost the Kingdom’s secondary mortgage market.

SRC, formed in 2017, is also keen to tap foreign institutional investors for its debt sale this year, Fabrice Susini told Reuters in an interview.

“Our strategy is clearly to tap the market twice this year,” he said. “We are really looking at probably issuing something between ... 2 and 4 billion riyal that we may be issuing in two tranches.

He said SRC was looking at sukuk in the 10 to 15-year range, to help minimize refinancing risks. “Generally speaking we are trying to issue as long as possible,” Susini said.

He said the company was assessing whether it could also issue bonds in currencies other than the local riyal.

In March, SRC completed a 750 million riyal sukuk issue with multiple tenors, under a program that allows it to issue up to 11 billion riyals of local currency denominated Islamic bonds.

“The rule of the game for us is, like many projects across the Kingdom, attract liquidity from foreign investors,” Susini said.

He said SRC had spent 1.2 billion riyals from its balance sheet buying mortgages from local mortgage financing companies and provided liquidity to these firms.

It has also signed initial accords with several commercial banks to acquire housing mortgage portfolios.

Saudi Arabia’s housing ministry is targeting the mortgage market to reach a total value of 502 billion riyals by 2020 from around 300 billion riyals now.

The government wants to increase activity in the real estate market as it moves to revitalize the economy and is taking steps to reform the sector as part of its 2030 reform plan.

It has been working with developers and local banks to counter a shortage of affordable housing — one of the country’s biggest social and economic problems. Saudi Arabia wants 60 percent of its nationals to own homes by 2020, up from 47 percent in 2016.

The size of real estate financing relative to its gross domestic product is 5 percent in Saudi Arabia compared to 69 percent in the United States, 74 percent in the United Kingdom and 43 pct in Canada, the housing ministry has said.

“The goal of SRC in this market was to make sure that we will be able to refinance at least around 10 percent of the market in 2020, and 20 percent of the market by 2028,” Susini told Reuters.


A sham Qatar deal could have cost ex Barclays exec $64m, court hears

Updated 30 min 5 sec ago

A sham Qatar deal could have cost ex Barclays exec $64m, court hears

  • Roger Jenkins stood to get “good leaver” package -lawyer
  • Defense lawyers tell jury SFO case is misconceived, perverse

LONDON: A former top Barclays executive, on trial in London on fraud charges, would have risked a £50 million ($64 million) “good leaver” package if he had sought a criminal deal with Qatar during the credit crisis, a court heard on Thursday.
It would have been “lunacy” for Roger Jenkins, one of three men charged with fraud over undisclosed payments to Qatar during emergency fundraisings in 2008, to risk such accrued benefits and a job that had paid him 38 million pounds in 2007 alone, his lawyer told a jury at the Old Bailey criminal court.
The high-profile Serious Fraud Office (SFO) case revolves around how Barclays — one of the few major British banks to survive the credit crisis without direct government aid — raised more than 11 billion pounds ($14 billion) from Qatar and other investors to avert a state bailout as markets roiled.
Prosecutors allege that former top executives lied to the market and other investors by not properly disclosing 322 million pounds paid to Qatar, disguised as “bogus” advisory services agreements (ASAs), in return for around four billion pounds in two fundraisings over 2008.
Jenkins, the former head of the bank’s Middle East business, Tom Kalaris, who ran the wealth division and Richard Boath, a former head of European financial institutions, deny charges of conspiracy to commit fraud by false representation and fraud by false representation.
Lawyers for Jenkins and Kalaris told the jury the case against their clients was misconceived, perverse and illogical and that there was no evidence the ASAs were a sham or fake.
In brief opening speeches before the prosecution continues laying out its case, they alleged the defendants believed the ASAs were genuine agreements to secure lucrative business for Barclays in the Middle East — a region it was keen to exploit.
They said the agreements were side deals during emergency fundraising that June and October that had been approved by internal and external lawyers and cleared by the board.
“The unequivocal, repeated advice was that this was legitimate — providing the ASA was a genuine contract for the provision of benefits to Barclays,” said John Kelsey-Fry, a senior lawyer representing Jenkins.
Jenkins, who will give evidence later, had pursued and won the trust of Sheikh Hamad bin Jassim bin Jabr Al-Thani, the former prime minister of Qatar, and wanted to unseat Credit Suisse as the wealthy, gas-rich Gulf state’s preferred bankers, the jury heard.
Had Jenkins considered a fraudulent deal with Sheikh Hamad, the sheikh might have rung up Barclays bosses and said: “Neither I nor QIA (the sovereign wealth fund) are putting a penny in a bank like yours. I will never do business with you again,” Kelsey-Fry said.
Qatar Holding, part of QIA, invested in Barclays alongside Challenger, Sheikh Hamad’s investment vehicle.
The case against Kalaris, meanwhile, hung on three conversations he had had with Boath on the afternoon of June 11, 2008, that the prosecution had “fundamentally misunderstood,” his lawyer Ian Winter said.
When Kalaris told Boath: “Noone wants to go to jail here” and that lawyers would provide “air cover,” he was trying to ensure that a genuine ASA would be approved by legal experts as a legitimate means of paying Qatar for real value, Winter said.
All three men, aged between 60 and 64, are charged over the June fundraising. Jenkins, alone, also faces charges over the October fundraising.
The trial is scheduled to last around five months.