Saudi Arabia’s Etihad-Etisalat (Mobily) has launched the syndication of a SR10bn ($2.66bn) refinancing deal to banks in the region.

The loan is split into four tranches, offering banks the opportunity to provide loans in either Saudi riyals or dollars, and in one of two tenors. Proceeds from the deal will be used to repay existing debt and fund the company’s expansion.

Bankers who have been invited to fund the deal say the loan documentation does not currently include any mention of a sukuk (Islamic bond) issue as part of the refinancing. The deal had been expected to include a sukuk as part of the company’s plans to diversify its investor base. One banker with knowledge of the deal says, “A sukuk could still happen later in the year, or early 2012 and be used to refinance the bank debt, but at the moment it is not being talked about.”

“Mobily has been thinking about a sukuk, but it is unlikely to occur because pricing will not be able to compete with the bank debt,” says a Riyadh-based banker.

Mobily’s last deal, a $320m deal with a group of local banks, was priced at just 65 basis points above the Saudi interbank offered rate.

Banks were first approached to finance the deal in mid-September, and have been given until 3 October to respond to the invitation to join the deal. The telecoms firm hopes to reach financial close on the deal before the end of the year. It had originally wanted to complete the refinancing by the end of June. Mobily appointed the local Samba to lead the refinancing earlier this year. Samba’s mandate also includes advising Mobily on the development of a new capital structure (MEED 18:03:11).