A group of three local banks have agreed to finance a SR14.5bn ($3.9bn) loan for the local Saudi Binladin Group to help fund the construction of the King Abdullah Financial District (KAFD) just outside Riyadh.

Three banks have underwritten the deal, Riyad Bank, Arab National Bank and Samba, with a further syndication expected to occur shortly.

The deal will have a tenor of about three years to match the construction period that Binladin will have for the scheme. The development is sponsored by the local Al-Rayadah Investments, the investment arm of the government-owned Public Pension Agency.

“This deal is basically exposure to the Saudi government, as banks are most interested in who the ultimate obligor for these contracts is. The banks take a lot of comfort from the fact that Binladin will be doing work for a government entity,” says a banker in Riyadh.

Sources in the kingdom also say banks have been comforted by the short tenor on the deal, especially given its size

The Binladin contractor financing deal was launched earlier this year, and banks hope to complete it in May. Several other contractor financing deals are expected over the course of 2010 as a result of the government pushing ahead with huge infrastructure spending plans to help combat the global financial crisis and the slowdown in the Saudi economy. In 2009, the country is estimated to have achieved growth of just 0.15 per cent, with growth of 3.9 per cent predicted in 2010.

Located on a 1.6 million square-metre site north of Riyadh, KAFD will have commercial and residential districts, with leisure and recreation facilities. In addition to the World Trade Centre and GCC Central Bank, KAFD will also be the site for the headquarters of the Capital Market Authority and the Saudi Stock Exchange (Tadawul).