Saudi Arabia’s Jabal Omar Development Company is unlikely to complete the financing of its real estate project in Mecca until September, according to sources close to the deal.

The company and its financial advisers had hoped to get the debt financing in place by the end of the first quarter, followed by a rights issue later in the year. Bankers now say the deal is targeted to close in September.

The financing is split between a SR3bn ($800m) bank loan, and a SR2bn rights issue. Five banks are understood to be in talks to fund the bank tranche of the deal, and are awaiting clarifications on several different aspects of the project from the developer before final commitments are made. One source close to the deal says, “The bank tranche could now exceed SR3bn, in which case Jabal Omar will probably take the extra money as it’s a huge development they’re working on.”

Plans for a rights issue are also making progress, with submission to the Capital Market Authority (CMA) for regulatory approval of the equity fundraising expected in June.

Although the financing plans for the project have made significant progress since the local Al-Rajhi was appointed financial adviser in May 2009, replacing the local Jadwa Investments, completing the bank tranche has been slower than hoped. One banker looking to lend on the scheme says, “There are still quite a few issues to be settled, but more banks are on board than a few months ago.”

Some bankers have raised the possibility of the rights issue being completed before the bank finance is put in place, although that will depend on the speed of the approval from the CMA to launch the equity offering.

Construction work on the Jabal Omar development, which involves the development of 38 residential towers and 40 hotels near the Grand Mosque in Mecca, began in September 2008. The total development cost is expected to be around SR18.4bn and will cover 2.5 million square metres. Completion is expected to occur in 2013.