Jabal Omar's $1.3bn financing nears completion

17 March 2010

Funding for Mecca real estate development to close later this month

Saudi Arabia’s Jabal Omar Development Company is hoping to complete a $1.3bn financing deal for the first stage of its real estate project in Mecca later this year.

The financing is split into two tranches, a SR3bn ($800m) bank loan and a SR2bn rights issue, both of which are being arranged by Jabal Omar’s financial adviser, the local Al-Rajhi Bank.

Sources close to Jabal Omar say they intend to complete the bank tranche of the financing around the end of the first quarter, followed by the rights issue later in the year. However, bankers in the kingdom say the timeline is likely to be too aggressive, and the bank financing is unlikely to close until the middle of the second quarter, which could delay plans to launch the rights issue.

One Saudi banker working on the deal says, “There are still a number of technical points that need to be clarified, and pricing has not yet been settled, so the bank loans will not be able to close for a while as yet.”

The bank debt on the project will be financed primarily by local banks and will be Shariah-compliant because of the project’s location in Mecca near the Grand Mosque. In total, the Jabal Omar project is expected to cost about $3bn. In 2007, the company raised about $530m from an initial public offering of a 30 per cent stake in the company.

Al Rajhi replaced the local Jadwa Investments in May 2009, after Jabal Omar removed them from the project because of failure to secure financing within agreed deadlines. Jadwa managed to raise just $400m for the project (MEED 25:5:10).

Construction work, which involves the development of 15 residential towers and 40 hotels, began in September 2008. In January, the company announced that it made a loss of SR1.5m in the fourth quarter of 2009, compared to a loss of SR18.3m in the same period of 2008.

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