Zain Saudi Arabia, a subsidiary of the Kuwaiti telecoms company Zain, has finished raising a $2.5bn Islamic loan it will use to refinance another $2.5bn loan from 2007.

The loan will fund the expansion of Zain Saudi Arabia’s mobile phone network.

Eight banks, both local and international institutions, financed the loan.

France’s Calyon, Saudi Arabia’s Al-Rajhi Bank, and Banque Saudi Fransi, were the arrangers on the deal.

The deal pays a margin of 425 basis points over the London interbank offered rate (Libor), has a tenor of two years and includes an option for Zain to extend the loan by 12 months (MEED 24:7:09).

The banks have structured the loan as a Murabaha, where lenders buy a commodity and resell it to the borrower for a higher price to avoid charging interest.