The Islamic financing arm of Bank Muscat has received regulatory approval to raise funds through sale of sharia-compliant bonds.

Muscat-based Capital Market Authority (CMA) has given initial approval to Meethaq Islamic Banking to set up its proposed RO100m ($259m) Sukuk al-Musharaka programme, Bank Muscat said in a statement to Muscat Securities Market, where its shares are traded.

It did not say when the company plans to tap the debt market and what will be the use of the proceeds.

The parent firm, Bank Muscat is already engaged in talks with banks to refinance an imminent maturity of $600m loan it had raised in 2014.

The lender, which had asked banks to submit proposals to help it with a syndicated facility without specifying the exact size, is working with several regional and international banks. Last month told MEED the bank is likely to raise the entire $600m to cover the maturity and the transaction is expected to be completed within weeks. Media reports have suggested that the size of facility could be $500m.

Bank ABC, Bank of Tokyo-Mitsubishi, Citigroup, Commerzbank, HSBC, Mizuho, National Bank of Abu Dhabi, Sumitomo Mitsui Banking Corp and Wells Fargo were the banks involved in 2014 financing deal.

Bank Muscat, one of the top lenders in the country, earlier in January reported a flat bottom-line for full-year 2016 with net income rising only 0.6 per cent to RO176.56m compared to RO175.45m for the same period reported in 2015. The net profit was affected by a rise in operating expenses and a reduction in the share of income from associates, which stood at RO1.73m against RO2.56m for the same period in 2015, the lender said in a statement to Muscat bourse at the time.