KSA MBS

completed

The proposed project is a $30 million IFC investment in Kingdom Installment Company (KIC or the company) to support the company’s future housing finance program. IFC’s investment would be in the form of a credit enhancement of the mezzanine tranche of the mortgage backed securities (“MBS”) to be issued by KIC. The project will allow the company to grow its housing finance operations and establish a market based housing finance program. IFC will also consider taking a small equity/quasi equity position in KIC. The rationale for the equity investment would to help KIC develop its business further along industry best practice lines and to eventually become a housing finance bank once the law establishing housing finance banks in Saudi Arabia has been enacted. Saudi Arabia currently does not have specialized body for regulating housing finance lenders and regulatory oversight is limited. Through its investment, IFC will help the company in its preparation and transition to becoming a non-bank housing finance institution IFC’s equity investment will be considered following due diligence and only if there is a robust role for IFC, and a potential for an upside can be established as well as appropriate exit mechanisms can be identified or negotiated with the sponsors. IFC will play a catalytic role in introducing the company to a potential technical partner (HDFC etc) in helping them convert into a housing finance bank. Under the proposed securitization, KIC will issue MBS backed by a pool of Shariah-compliant_x0002_ housing finance contracts originated in the Kingdom of Saudi Arabia (KSA). The issue will represent the first Shariah-compliant MBS issued in Gulf Cooperation Council (GCC) countries. The MBS would allow the KIC to diversify its funding sources by tapping the regional capital markets and enhance its liquidity needed to originate additional housing finance contracts especially as the company launches a new growth phase of its housing finance operations. The project will also introduce a high quality new shariah compliant asset class to the regional markets. KIC has engaged Unicorn Investment Bank (UIB) out of Bahrain as arranger/placement agent, Lovell’s (London), who has an extended legal practice in Islamic financing and securitization, as the lead counsel and White and Case (Saudi Arabia) as local counsel for the MBS. Also, KIC has mandated Ernst and Young (Saudi Arabia) to provide advice on the tax and other accounting implications of the transactions. Finally Bearing Point (US) has been contracted to complete the cash-flow model for the MBS. The transaction is expected to be rated by Capital Intelligence Limited out of Cyprus..