Borrower: Multiple special purpose vehicles
Obligor: Alfanar Global Development
Size: $1.8 billion
Structure: Murabaha, istisna-ijara facilities
Tenor: 7.5 years
Banks: Alinma Bank, Riyad Bank, Saudi Awwal Bank
Date: January 2023
Neom in Saudi Arabia is one of the world’s most ambitious urban development projects. It requires similarly ambitious levels of investment and financing, including SR21 billion ($5.6 billion) to build accommodation to support the development’s growing workforce.
This sum makes it one of the largest international public-private partnerships for accommodation. It covers multiple projects over multiple phases, with the first set of projects in the first phase being the construction of five villages or towns.
Each of the towns is intended to provide housing for 10,000 people and will be around 567,083 square meters in size. They will include over 237 labour accommodation units, multiple sports and entertainment facilities, dining facilities, access to medical care, mosques and utility buildings.
Saudi construction and operations company Alfanar Global Development won the contract to build, operate and maintain the five towns, which will require $2.5 billion of investment, part paid for by $1.8 billion in shariah-compliant debt and equity financing across multiple tranches.
Such a complex all-Islamic financing structure made the deal stand out from several other large project financings in the region last year
Three Saudi banks are providing the financing on a per project basis or as separate financings. Each has been structured across equity bridge murabaha facilities, including base and standby equity facilities denominated in Saudi riyals.
The senior debt finance istisna-ijara facilities include base and standby facilities, with tranches denominated in riyals and dollars.
Working-capital facilities and VAT murabaha facilities are denominated in riyal-. There was also a shariah-compliant equity bridge and senior facilities profit rate swaps.
Such a complex all-Islamic financing structure made the deal stand out from several other large project financings in the region last year.
It was the first accommodation social infrastructure public-private partnership for Neom to reach financial close, potentially opening increased private-sector participation in delivering essential infrastructure in the development.
This distinguishes it from other financings, making it Euromoney’s best Islamic project finance deal this year.
