Saudi Binladin Group (SBG), the biggest contractor in kingdom by turnover, has agreed to raise a close to SR2.5bn ($667m) loan from a group of local banks by pledging its properties in Mecca and Jeddah.

The company, which has laid off nearly 80,000 of its workforce in recent months, will primarily use the funds to clear the end of service dues and boost cash reserves to regularise delayed salaries of the employees, according to banking sources.

The company had originally approached banks about a month previous to secure SR5bn in cash. However, only a small group of lenders have agreed to extend the SR2.5bn facility, the sources said, asking not to be identified as the discussions are private.

The deal will be signed shortly and lenders Saudi British Bank (Sabb) and Arab National Bank are said to be leading efforts to arrange the loan for SBG, the sources said.

The assets pledged by the SBG are valued between SR7bn to SR9bn, they added.

“By taking about 250 per cent coverage on the loan, the banks are securitising their exposure to SBG,’’ says one Riyadh-based banker. Banks are mostly exposed to SBG through project and construction finance collateral and this loan will give them additional security from SBG, reducing their risk on overall SBG receivables, the banker adds.

A Jeddah-based spokesman of SBG declined to comment on the transaction.

“As a principle, the group doesn’t comment on its financial issues or relationships with its business partners, which are to be managed directly and exclusively with relevant stakeholders, including our supplier, vendors, clients, banks and financial institutions,’’ he said in a statement in response to emailed questions from MEED.

SBG, one of the oldest and the biggest contracting firms in the region, has mainly relied on multibillion-dollar state contracting for business. The company ran into financial difficulties and laid off workers to cut cost as the government barred it from competing for new business in the kingdom following a crane accident late in 2015, which claimed more than 100 lives in holy city of Mecca.

The ban was lifted last week through a royal decree, but the company still awaits delayed payments from the government.

The large-scale layoffs at the company have led to violent protests and some workers who have not been paid for months set company buses on fire. SGB in March also had to seek help from Mecca police and agreed to pay delayed salaries to its staff in a deal with the Labour Ministry to end the protests.

The labour strife has prompted government intervention. Labour Minister Mufarrij al-Haqbani on 3 May said the crisis surrounding SBG will be resolved as the company has promised to address all wage-related issues and added that some workers will get paid this month, with some others receiving salaries in June and so on.

The company according to media reports has so far fired up to 77,000 foreign workers, however the labour minister did not confirm the number of job cuts at the firm.

“The Group is honouring its commitments and the affected employees have already received their full compensations and any other entitlements in accordance with the applicable laws,’’ a company spokesman said in 2 May statement. “We will honour the same commitment in case further manpower is released.”