Bahrain sovereign wealth fund Mumtalakat is approaching banks to arrange a loan deal of up to $500m, according to bankers in the country.

Bankers say the funds will be used as bridge financing ahead of a bond issue later in the year. Mumtalakat is also currently in the process of getting a credit rating in preparation for the bond issue.

“Mumtalakat has started talking to some banks already,” says one Bahrain-based banker. “They are looking to do a club deal with a small group of lenders.” The fund has not appointed an adviser on the deal and is currently running the process itself.

Talks with potential lenders began in mid-January.

The investment fund’s chief executive, Talal al-Zain told Reuters on 29 January that Mumtalakat would issue Islamic bonds (Sukuk) before the end of the year. The sukuk could then be used to pay off the loan deal it is currently working on.

Mumtalakat also raised a $500m five year loan in August 2008 that was priced at 130 basis points above the London interbank offered rate (Libor- MEED 17:08:08).