The local Saudi Binladin Group (SBG) is in talks with Saudi and regional lenders to delay repaying some of the debt it owes, according to two people familiar with the situation.

The Jeddah-based firm, which is ranked the biggest contractor in the Middle East by turnover, is also looking to raise cash from regional and international lenders outside Saudi Arabia to meet some of its short-term liabilities, people said, asking not to be identified as talks are private.

SBG is dealing with individual banks, especially, those that have financed the Mecca Grand Mosque Expansion project, for rolling over debt, according to one Riyadh-based banker.

“SBG is talking to banks on an individual basis as and when loan repayments are coming due,” says the banker. ”It has so far been up-to-date with payments owed to us.”

A spokesman from the firm said financial decisions and actions by SBG are to be handled exclusively and directly between the company’s finance department and relevant stakeholders, including the company’s partners, the banks and other financial institutions. The spokesman did not comment on whether SBG has missed any of the loan repayments, or whether it is preparing to enter a formal restructuring of its debts.

SBG, like many other contracting companies in Saudi Arabia, the region’s biggest contracting market, is facing cash-flow bottlenecks as awards for new projects has slowed down to a trickle amid slumping oil prices and payments are delayed by developers.

Government infrastructure

SBG mainly relies on multibillion-dollar, large-scale government infrastructure projects. Oil prices have slumped close to 70 per cent since mid-2014, denting the financial muscle of Saudi Arabia, the biggest exporter in Opec’s oil basket. The kingdom has since embarked on an austerity campaign, rationalising infrastructure spending, including capping awards of new megaprojects last year.

SBG is still carrying out an estimated SR80bn-worth ($21.3bn-worth) of schemes and the Riyadh-based banker estimates that half of that amount could be leveraged from banks and other financial institutions.

The company’s financial position was also scrutinised by Saudi Arabia’s central bank last year. The regulator’s committee, comprising chief risk officers of local lenders, was tasked to evaluate the company’s outstanding amount to local lenders and the risk of defaults, which could hurt the local lenders already grappling with a liquidity squeeze in the system.

Most lenders in the kingdom are already heavily exposed to several SBG projects and are reluctant to open new credit lines, according to the banker.

Foreign banks

SBG is now talking to regional and international lenders outside the kingdom, especially banks in Abu Dhabi and Qatar, to raise loans, according to the second source.

SBG, which was the main contractor on Mecca’s Grand Mosque, Islam’s holiest site, has been under intense public scrutiny since September after a crane fell onto worshippers in the mosque. The accident left 100 dead and in the aftermath of the disaster, the contractor was barred from winning new schemes in the kingdom. SBG has also been asked to stop work on the Prophet’s Mosque expansion project in Medina.

MEED reported on 1 February that the government has completed the investigation into the crane accident and it is expected to make an announcement within weeks.

It is understood the company may have to face hefty fines, but it will be cleared to carry on working on projects and win new business in the country. However, with a deteriorating order book and uncertainty in terms of the financial penalties it may have to pay and when it will be able to start winning new businesses, SBG is finding it difficult to raise finance in the domestic market.