Saudi real estate firm Dar al-Arkan is planning a local Islamic bond (sukuk) issue to refinance $600m of debt, according to bankers in the kingdom.

Several banks have already been appointed to manage the issue and a roadshow of potential investors is expected to start by mid-February.

The proposed sukuk issue has already been rated by Moody’s Investors Service as Ba2, and by Standard & Poor’s as BB-.

“The ratings on Dar al-Arkan reflect its exposure to the speculative, cyclical and capital-intensive nature of land development and home-building activities,” says Pierre Georges, credit analyst at Standard & Poor’s. “Also, the immature and still-opaque characteristics of the housing market in Saudi Arabia, the volatility of revenues from land sales, the potential execution risks from its increasingly large projects, and its financial risk profile, which we consider to be significant.”

The real estate firm issued a $1bn sukuk in July 2007 with a five-year tenor that was listed on the Bahrain Stock Exchange.