Saudi Real Estate Refinance Lining Up $1bn Debut Dollar Sukuk

Saudi Real Estate Refinance Co (SRC) has lined up a debut dollar sukuk worth $1bn by the end of the year. The issue of the Sukuk is likely to be between $500mn and $1bn with a tenor between 10 and 12 years. Moody’s has assigned a first time issuer rating of A2 with a negative outlook to SRC yesterday. Fitch also assigned SRC a rating of A with negative outlook on April 14, 2021. Both the rating agencies classify the company as a government-related entity (GRE). SRC, a subsidiary of Saudi Arabia’s sovereign Public Investment Fund (PIF), was established in 2017 to increase home ownership among Saudi nationals and is modelled on US mortgage finance firm Fannie Mae. As per Moody’s, “SRC is solely owned by the Saudi government through the Public Investment Fund (PIF, Saudi sovereign wealth fund) and is licensed to operate in the secondary real estate market by the Saudi Central Bank, formerly known as Saudi Arabian Monetary Authority (SAMA).” The company benefits from a supportive government  policy and is not subject to Zakat (Islamic tax). It held a loan portfolio worth SAR 6.5bn ($1.73bn) as of end of 2020 and aims to increase its real estate loans market share to 20% by 2025. The company last sold SAR 4bn ($1.07bn) debt in a two-tranche private placement of sukuk guaranteed by the Saudi finance ministry.