Abu Dhabi’s Mubadala Development Company is planning to approach banks for a $1.2bn project finance loan to fund the development of the Sowwah Square project on the capital’s Sowwah island.

The deal is being led by Royal Bank of Scotland (RBS), which was appointed as financial adviser on the project in mid-2009.

RBS had been approaching banks about the deal in late 2009 as part of a market sounding exercise to gauge banks’ appetite for the deal. Banks were then told that the financing was expected to feature a tenor of seven years (MEED 01:10:09).

It is unclear what tenor will now be used, and how the deal will be structured to appeal to project finance lenders who typically look for some sort of guarantee when granting loans.

Bankers close to the deal say the financing could be split into two $600m loans. If that is done, each loan would then be structured like a Mubadala corporate loan with the buildings acting as assets backing the deals. This differs from typical project finance loans which require the lenders to take on the real estate risk associated with the project.

The last meetings between Mubadala and potential lenders had been scheduled to occur late last year.

Sowwah Square is a key part of the Sowwah Island development, which is a major component of Plan Abu Dhabi 2030, the city’s masterplan. Once developed, it will contain the Abu Dhabi Securities Exchange headquarters, several office towers and two five-star hotels.