About International Finance Corporation

by | Jun 22, 2008 | Industry Interest, Media, Media Coverage, Uncategorized

SA PARTICIPATION IN LANDMARK MIDDLE EAST SECURITISATION DEAL
Riyadh , July 17, 2006 South African banking giant’s UK operation, Standard Bank Plc (Standard) and Unicorn Investment Bank (UIB) have successfully closed a landmark securitisation transaction on behalf of Kingdom Installment Company Llc (KIC) of Kingdom of Saudi Arabia (KSA), a pioneer of housing finance in the Kingdom. SA Home Loans founder and former chief executive officer Simon Stockley, led the structuring team, representing the client’s interests and managing the execution of the transaction.

The underlying Sukuk structure achieved an ‘A’ credit rating from Capital Intelligence Ltd, (CI) an international credit rating agency with a strong presence in the Gulf region. The International Finance Corporation (IFC), the private sector financing arm of the World Bank Group provided mezzanine credit enhancement, taking the form of a stand-by Murabaha facility.

“The Sukuk transaction is the first true-sale securitization in the GCC,” says Stockley, who is currently retained as the chief operating officer of Kingdom Installment Company. Stockley founded South Africa’s first non-bank home loan company SAHL in 1998 and pioneered the development of South Africa’s now burgeoning securitisation Industry.

“The deal is backed by US$23 million of Ijara and Istisna contracts, providing an off-balance sheet, alternative source of funding to KIC as well as being a Shari’ah-compliant, fixed-income investment product (akin to a mortgage-backed security) to the international capital markets. All previous attempts to securitise assets in the region have either failed to achieve significant investor support or have had to rely on credit support from the issuer. Now, for the first time investors have direct credit exposure to the performance of the underlying assets (in this case Saudi real estate). The commitment of Standard Bank to the transaction was key to galvanizing international investor appetite for the deal,” adds Stockley.

“It is extremely gratifying and exciting to be able to build on the technologies and expertise developed in our local market and apply these internationally, particularly in a dynamic environment such as Saudi Arabia. The deal provides positive proof that individual South Africans and South African companies are able not only to ‘hold their own’ in the international arena, but are able to be at the forefront of change and innovation,” continues Stockley.

“The transaction has broken new ground from a legal, financial and Shari’ah structuring point of view and provides a model for other financial institutions, both internationally and potentially within RSA, seeking liquidity to fund housing finance operations in a Sharia complaint manner. It will have the added benefit of making home ownership more accessible to Saudi’s while helping to develop the backbone of a vibrant Islamic capital market,” Stockley adds.

“The knowledge and expertise we have acquired as a result of this deal, opens up a host of opportunities in SA for the structuring of securitisation transactions that are Shari’ah-compliant and in addition, provide structured finance solutions to the South African Islamic community. In the rapidly expanding sector of Islamic Finance South African practitioners are making their presence felt on a global basis. Our flexibility and understanding of emerging markets gives us a competitive advantage over first world players who tend to be more cautious and risk adverse.”

The securitisation is part of a series of Sukuk issues expected from KIC, which will enable the company to meet the huge demand for housing finance in KSA. Home ownership is set to continue its significant growth in the Kingdom given the young population demographics and a growing middle class. Recent research shows 86 percent of the country’s population is under the age of 40, demonstrating the growing demand for new homes.

South African Media Enquiries
Joanne Hayes
Tumbleweed Communications
weeds@iafrica.com
Mobile: +27 83 6277249
Tel: +27 31 5630130

London Media Inquiries
Mark Lunn of Gavin Anderson & Co, London
UK Tel: +44 (0) 20 7554 1400
UK Mobile: +44 (0) 7775 992 309
mlunn@gavinanderson.co.uk

Saudi Arabia Media Inquiries
Sultan Al Bazie of Tariq Media Co
KSA Tel: +966 (1) 460 1600
KSA Mobile: + 966 (505) 814466
sultan@tariq4media.com
Additional QUOTES

Carl Piccolo, Head of Syndicate at Standard: “The transaction was targeted at investors outside of the GCC Region and placed 15% with Asian Accounts and 85% with European Accounts, principally based in London. As a relatively small deal, Banks formed the overwhelming majority of investors by type. The deal was sold against a volatile emerging market backdrop for fixed income securities, a testament to the robustness of the structure and appetite for Saudi risk in RMBS format.”

Abdullatif Alshalash, Board Director at KIC: “The merging of traditional Shari’ah structures with modern conventional finance mechanisms, such as securitisation, represents a quantum leap in the evolution of Islamic Finance. By directly accessing the capital markets and securing long-term funding we have unlocked one of the key inhibitors to the growth of homeownership in the Kingdom of Saudi Arabia.” In addition, Simon Stockley, COO of KIC added: ‘The transaction is truly international and has been structured and rated to the highest international standards. Saudi real estate assets have been used to collateralize a Cayman Island Special Purpose Vehicle; structured out of London with Dollar denominated cash flows; credit rated from Capital Intelligence and credit enhanced by the IFC.”

Nina Shapiro, IFC’s Vice President of Finance and Treasurer: “This securitization is a landmark transaction in the GCC region. IFC’s active involvement in the structuring of this transaction is another example of IFC’s contribution to the development of local capital markets. This innovative transaction introduces a high quality asset class to the investors in the region and will be a benchmark for future securitizations out of the GCC region.”

 

FACT SHEET

About the Sukuk

  • Sukuk Amount: US$18 million (22% over collateralization) – underlying Assets $ 23 million
  • Sukuk matures in 2020
  • Purchase undertaking by KIC at month 36 (2009)
  • Proposed profit rate:
    – 6.55% (up to month 36)
  • No prepayments allowed on underlying contracts
  • Credit Enhancement:
    – First Loss – Reserve Account with an initial balance of 5% of the issuance amount
    – Second Loss – Guarantee by DAAR for 10% of the issuance amount
    – Third Loss – Credit enhancement by the IFC through a Tawarruq Facility for 10% of the Sukuk principal balance on an amortizing basis
  • 193 underlying Shari’ah-compliant mortgages originated in KSA:
    – 71% Ijara
    – 29% Istisna
  • The Sukuk has been approved by UIB’s Shari’ah Board

About the Issuer
The Issuer is a special purpose limited liability company incorporated in the Cayman Islands.

About Kingdom Installment Company

Established in 1977, Kingdom Installment Company (KIC) is the largest specialist housing finance company in the Kingdom of Saudi Arabia. Dealing only in Shari’ah compliant housing finance solutions, the company has financed more than 3,000 home purchasers since its establishment as an offshoot of Dar El Arkan Real Estate Development Company. KIC‘s current loan portfolio is in excess of $430 million, with a default rate of less than 0.5 %. The company was the first lender in the region to offer 20 year fixed rate loan financing and has pioneered the use of Sukuk structures to allow investors to participate directly in the Saudi Real Estate market. KIC announced on July 13th 2006 a strategic alliance with Arab National Bank (ANB) which will see the company re – capitalized as a joint venture entity to in excess of $534 million making the company the largest specialist housing finance organisation in the Middle East and North Africa Region (MENA).

KIC Contact:
Simon Stockley
Chief Operating Officer
Riyadh, Kingdom of Saudi Arabia
Tel: +9661 (206) 1100 ext 1177
Mobile + 27 83 2760068 .
E-mail: simonst@iafrica.com

About Standard Bank Plc

The Standard Bank Group is one of the world’s leading emerging markets banks. It is headquartered in Johannesburg, South Africa, and is listed on the Johannesburg Securities Exchange. It has offices in 38 countries throughout Africa, Asia, the Americas and EMEA. It is the largest financial services organisation in South Africa and Africa with total assets as at 31 December, 2005 of US$120 billion, headline earnings of US$1.42 billion and a current market capitalisation of more than US$18 billion. The Group’s business covers a broad range of activities in Corporate and Investment Banking, Personal and Business Banking and Investment Management and Life Insurance.
Standard Bank Plc in London is the focal point for the group’s international Corporate and Investment Banking business and Standard Bank Asia Limited in Hong Kong is the hub for its Asian operations, which include offices in Hong Kong, Singapore, Kuala Lumpur, Shanghai, Taipei and Sydney.

Standard Bank Contact:
Carl Piccolo
Standard Bank Plc
Address : Cannon Bridge House, 25 Dowgate Hill, London EC4R 2SB
Telephone : +44 (0)20 7815 3142
Fax : +44 (0)20 7815 3091
Email : carl.piccolo@standardbank.com
About Unicorn Investment Bank

Unicorn Investment Bank was capitalized at US$ 111 million and commenced operations on May 5, 2004 in the Kingdom of Bahrain. UIB is a full service Islamic investment bank, with specialist teams operating in corporate finance and capital markets, private equity, asset management, strategic mergers and acquisitions and Takaful (Islamic insurance). The bank currently has offices both inside and outside the Middle East, including the United States and Malaysia.

UIB Contact:
Tahir M. Naseem
Director Structured Finance
Manama, Kingdom of Bahrain
Tel: (973) 17566031
tnaseem@unicorninvestmentbank.com
About International Finance Corporation

The mission of IFC is to promote sustainable private sector investment in developing and transition countries, helping to reduce poverty and improve people’s lives. IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, helps clients improve social and environmental sustainability, and provides technical assistance and advice to governments and businesses. From its founding in 1956 through FY05, IFC has committed more than $49 billion of its own funds and arranged $24 billion in syndications for 3,319 companies in 140 developing countries. IFC’s worldwide committed portfolio as of FY05 was $19.3 billion for its own account and $5.3 billion held for participants in loan syndications. For more information, visit www.ifc.org

IFC Contact:
Adriana Gomez
agomez@ifc.org
+1 202 458 5204



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Strong SA Participation in Saudi Arabia’s First Independent Specialized Mortgage Finance Institution, with Market Cap in Excess of $500million

by | Jun 22, 2008 | Industry Interest, Media, Media Coverage, Uncategorized

Strong SA Participation in Saudi Arabia’s First Independent Specialized Mortgage Finance Institution, with Market Cap in Excess of $500million

Riyadh – The International Finance Corporation (IFC), the private sector arm of the World Bank Group, today signed an agreement with Arab National Bank (ANB), Dar Al-Arkan Real Estate Development Company (DAAR) and Kingdom Installment Company (KIC), to create the first independent, specialised, Shariah-compliant housing finance institution in the Kingdom of Saudi Arabia. The deal, with a market capitalization in excess of $500 million, was conceived and brokered by Simon Stockley, founder and former CEO of SA Home Loans (SAHL), who has spent the last 18 months in Saudi Arabia, structuring the transaction, as an independent consultant.

“We are delighted with the outcome of some intense and at times, difficult negotiations,” says Stockley. “The result of the deal, in a challenging regulatory environment, has led to the creation of the Middle East and North Africa’s (MENA) largest specialist mortgage finance company. The ability of South African Mortgage Bankers to hold their own in the international arena is testament to the level of sophistication and evolution of the local market and our experience in operating in emerging economies,” Stockley adds.

The shareholders of the new venture include Arab National Bank, the Kingdom’s sixth largest commercial bank with an established track record in the consumer banking sector; Dar Al-Arkan Real Estate Development Company, the Kingdom’s largest residential real-estate developer and Kingdom Installment Company, the captive financing arm of DAAR and the pioneer of Shariah-compliant housing finance in the country. The planned initial capitalization of the Saudi Home Loans Company will be SAR2 billion (ca. US$533 million).

“We were able to lever off the experience gained in establishing SA Home Loans, by pairing up a retail bank, a developer, with an established retail footprint and the international technical skill and expertise of the IFC, to create a world class housing institution.”

By increasing the availability and affordability of housing, the new company, Saudi Arabian Home Loans (SAHL), intends making long-term mortgage financing available to Saudi locals in a Shariah-compliant manner, which is expected to promote home ownership to the middle and lower income segments of the Kingdom’s population, which are currently under-served in their access to housing finance. Current providers of housing finance have very limited programmes that do not meet the increasing demands of consumers particularly in structuring lending products that confirm with Shariah principles.

“We are delighted with the establishment of Saudi Home Loans Company,” says Jyrki Koskelo, IFC’s Director for Global Financial Markets. “Our investment provides a strong driver for the development of the nascent housing finance market not only in Saudi Arabia, but for the whole region. Without increasing the availability of long-term funding for housing finance, the lower-income segments of the market will continue to be under-served and denied the chance of home ownership.”

Michael Essex, IFC’s director for the Middle East and North Africa adds, “The creation of the first specialized primary housing finance institution in the Kingdom will have a strong demonstration effect and will encourage replication of this initiative by other private sector players in the country. We expect that the entry of this kind of institution will stimulate competition among other local and international players, which will improve market conditions, choices for customers and the delivery of quality financial services.”

Technical assistance to the programme will be provided by Housing Development Finance Corporation (HDFC), India’s leading mortgage finance provider, who will train the new company’s management in the areas of credit risk management, operations and management information systems.

“This dynamic alliance between the parties will allow us to rapidly and aggressively expand our financing program so as to offer consumers greater choice and flexibility in respect of their housing finance requirements, continues Youssef Al-Shelash, Chairman of KIC. “For the first time Saudi consumers will be able to look to the collective skills and expertise of a leading retail bank, a specialist real estate finance company and the experiences gained in the South African market, to structure and make affordable Shariah-compliant financing solutions to purchase residential properties.”

Dr. Robert Eid, ANB CEO, says, “This project is an important part of Arab National Bank’s strategy to develop housing finance as a core growth sector for the bank and to develop and provide Shariah-compliant financing solutions to the bank’s clients in relation to purchase of homes. The insights and experiences learned form the evolution of other emerging property markets (such as in South Africa), will be a key determinant in the success of the venture.”

The area of Shariah-compliant housing finance (i.e. property finance that conforms to the principles of the Koran) is currently undergoing a phase of rapid growth and expansion with a number of local banks in South Africa establishing Islamic finance divisions to serve the demand of their customers for complaint lending products.

“One of the benefits of the transaction from a local perspective,” says Stockley, “is that we anticipate an inflow of technology back into the South African market which is currently undeveloped in respect of Sharia-compliant product.”
Media Enquiries:
Joanne Hayes, Tumbleweed Communications
weeds@iafrica.com
Mobile: +27 83 6277249