A group of Barclays Capital, Dresdner Bank, Mizuho Financial Groupand Saudi American Bankhas agreed to underwrite the nine-year facility, a banker involved in the deal told MEED in February. The purpose of the loan is to secure cash flow for CLC in advance of the rental streams. The terms of the loan include a provision giving the banks recourse to the Finance & National Economy Ministry, on behalf of MoDA, the banker said (MEED 8:2:02).

It is understood that the ultimate owner of the two compounds – in Riyadh and Al-Khobar – is real estate venture Jadawel International, headed by Mohamed bin Issa al-Jaber, a prominent Saudi businessman. Mohamed bin Issa was not available to comment.

An official at Barclays Capital on 14 May confirmed that a payment had been delayed, but said it was primarily an administrative problem that is now being sorted out. The statement was in reaction to a report in the London weekly The Sunday Times that quoted a letter it said had been sent on 2 May from Elie Khouri, the bank’s senior executive dealing with the region, to Ghazi Algosaibi, the Saudi ambassador to the UK. The letter expressed ‘great concern’ relating to ‘obligations of the Ministry of Finance of the Kingdom of Saudi Arabia to international banks,’ according to the newspaper. The Barclays official acknowledged to MEED that a letter had been sent.

Plans to raise finance against the lease of military compounds were first discussed in the late 1990s with another group of banks and advisers, led by Credit Suisse First Boston.

A source close to the group working on the earlier scheme expressed surprise that the issue of the delayed payment had aroused such concern at this early stage. ‘MoDA has a good record of paying its obligations, but delays of a few months are not unusual,’ the source said.