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Saudi Arabia’s Freddie Mac plans sukuk to raise $267m

Saudi Arabia’s Freddie Mac plans sukuk to raise $267m

Saudi Real Estate Refinance Co, the kingdom’s first mortgage-refinancing firm, plans to raise as much as SR1 billion ($267 million) in Islamic bonds by the end of the year.

The sale by the state-run equivalent of Fannie Mae and Freddie Mac in the US would be its second this year and the company hasn’t decided whether it will be a local or international offering, CEO Fabrice Susini said in an interview in Riyadh. In March, it raised SR500 million and also sold sukuk last year.

The deal “will most likely be supported according to the agreement signed with the Ministry of Finance,” Susini said. The company in May said the Ministry of Finance would guarantee future sukuk sales, helping to lower funding costs and attract foreign and local and international investors.

Saudi Arabia is making moves to increase home construction and lending as it seeks to overcome one of the world’s lowest mortgage penetration rates. For years, the absence of financing firms like SRC limited the ability of banks to expand their mortgage books amid central-bank limits on loans to any one sector.

From next year, the company plans to tap international sukuk markets “on an ongoing basis,” Susini said.