Zain Saudi Arabia (Zain KSA), the loss-making telecom company part-owned by Kuwait’s Zain Group, has finally reached an agreement with its banks to refinance a $2.3bn loan that was originally due to be repaid in 2011.

The refinancing will extend the debt over an additional five years and has been funded by the local Al-Rajhi, Arab National Bank, Banque Saudi Fransi and France’s Credit Agricole, according to bankers in the kingdom.

The deal was part of a recapitalisation plan for the company that also included a $1.6bn rights issue and the loan refinancing. Zain KSA’s financial health has also been bolstered by the Finance Ministry agreeing to defer SR5.6bn of licence fee payments due over the next seven years, and wrapping them up into a loan, which will start to be repaid in 2021. Bankers in the kingdom say that the government will charge 1.25 per cent on this loan.

Zain KSA has struggled to become profitable since its inception in 2007 and after paying $6.1bn for the third mobile licence in the country.

One banker close to the company says the latest refinancing and the deal with the Finance Ministry will put the company in a much better position. “There will be a lot of cash in the business now these two deals have been done, and that puts them in a much better position,” says the local banker.