Zain Saudi Arabia (Zain KSA) has written to its banks asking them for a two-month extension on a $2.6bn debt that matures on 27 July after its plans to refinance it were hit by delays.

The firm sent out the request to its existing lenders last week as it became increasingly clear that a $1.6bn rights issue would not be finalised by the time the loan needed to be refinanced. Banks on the new loan have insisted that the rights issue is completed before the new loan is signed.

“Because of delays with the rights issue, and delays with documentation and getting the approvals of all the existing shareholders, the closing of the term facility is now delayed,” says one banker close to the company.

The loan was originally due to mature in February, but banks gave the company an extension after the potential acquisition of the firm by a consortium of the local Kingdom Holding and Bahrain’s Batelco collapsed in October 2011.

As a result, the loss-making telecoms firm launched the capital restructuring plan to help restore its finances and fund a plan to double its market share.

The rights issue will provide $200m to reduce debts, leaving the firm to raise $2.4bn. Sources close to the company say a bank group for the new five-year loan is in place, including three international banks. Most of the new loan is understood to be committed in riyals.

“The new loan is oversubscribed and although they could have used that to bring down the pricing, they are not because they know

they need banks on their side at the moment,” says one banker close to the deal.

The local Banque Saudi Fransi and Al-Rajhi are acting as advising on the fundraising by Zain KSA.