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Capital Markets

SC round up: Saudi Arabia pioneers regional RMBS

News of the first RMBS transaction out of Saudi Arabia has focused attention on the potential for real estate-backed issuance from the region.

KSA MBS 1 will securitize around US$22 million mortgage loans originated by Kingdom Installment Company, a Saudi-based finance company 35% owned by Al Arkan Construction. The IFC has committed to partly guarantee or purchase the mezzanine tranches of future RMBS deals out of the programme up to a total investment of $200 million. The initial three-year deal will be an interesting test case for the region and is being arranged by Bahrain-based Unicorn Investment Bank and Standard Bank. It uses a Cayman-based SPV. True sale securitization has been achieved in the country before, via a complex vehicle lease deal for Hanco Rent-a-Car in early 2004 that used a two-tier structure to establish security over the assets under Saudi law. Unlike that deal, KSA MBS 1 has been rated – by Cyprus-based Capital Intelligence Ltd – and achieved single-A minus.

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