The $950m acquisition of Zain Saudi Arabia (Zain KSA), part of Kuwait’s Zain Group, by the local Kingdom Holding and Bahrain’s Batelco has collapsed, with sources close to the deal citing problems overcoming the telecom firms existing debts.

Sources close to the deal say that the two partners have struggled to find a way to settle issues relating specifically to Zain KSA’s $2.6bn outstanding debt, which is predominately held by Saudi banks.

That the acquisition was close to collapse was revealed by MEED on 28 September. A day later the company confirmed it was not pursuing a bid for the company.

“Things are not really looking good [for the acquisition] because of Zain’s debts,” said a source familiar with the talks just days before the Kingdom Batelco consortium announced it was walking away from the deal on 29 September. The pair first submitted the offer to acquire Zain KSA on 13 March.

The consortium said in a statement that, “the terms and conditions as set out in its non binding offer could not be met to its satisfaction.”

The debt has always presented a problem for the two bidders, which banks had been skeptical they would be able to overcome. Bankers who hold Zain KSA debt say it is difficult to see how the two bidders would have been able to meet covenants on the existing debt (MEED 24:06:11). One banker in Zain KSA’s lending group says, “Banks have a lot of protection from Zain Group at the moment, and I don’t the current bidders can replicate that.”

Earlier this week a Kuwaiti court ruled that Zain Group’s annual general meeting and board elections in April were void as it was legally flawed. This would have created further complications for the acquisition. The operator is looking to appeal the ruling.