The Islamic Development Bank has opened a structured finance unit in Saudi Arabia, according to a source close to the situation. The move is in response to demand from member countries to finance large infrastructure projects with private sector participation. The IDB is working with consultants to create a business plan for the unit, which was established last year. The plan, which will be submitted to the bank's board of directors for approval, would include a five-year orientation, as well as a three-year rolling implementation plan. Sectors served could include agribusiness, sub-sovereign risk (municipality and commercial public sector), SMEs and micro-finance, including micro-insurance. The bank is reviewing direct lending via project finance or corporate finance; direct equity investment in private companies; local currency financing, including through Sukuks; guarantees, infrastructure funds; syndications and technical assistance funds, according to bank documents.
Subprime mortgage company Novastar Financial Corp. is set to close its first CDO next month, bringing the lender into a relatively small but growing group of originators using CDO technology as another form of financing. The deal came to market as a $347 million static mezzanine deal backed by subprime collateral. Novastar, which operates as a REIT, will retain 100% of the equity and is servicing some 30% of the collateral. So far, the lender has not hired additional staff for its CDO effort, according to Fitch Ratings.