Global Investment House, Kuwait's biggest investment bank, is no longer in talks with local banks to secure $1 billion in loans to refinance its foreign debt, sources said on Tuesday.

Talks between the two sides stopped after some banks asked for state guarantees before making a financing commitment, a source at a local bank told Reuters.

'The deal did not work. Banks did not get a response from Global and no one knows what's happening,' said the banking source.

Instead, the company turned to HSBC to help it renegotiate its debt with foreign lenders. Global, which had retained Commercial Bank of Kuwait as a debt advisor to local lenders last week, added HSBC to its roster on Sunday.

'Global went along with the alternative of appointing HSBC to renegotiate with the lenders. Talks with the local banks were taking time,' said another source familiar with the matter.

Global announced this month it was in talks with local banks to secure loans worth $1 billion to replace short- and medium-term foreign loans.

Officials at Global and CBK could not be reached for comment. Kuwait's central bank did not immediately respond to a Reuters email asking whether it will provide any guarantees.

The central bank rescued Gulf Bank, the country's fifth-largest bank, in October after it suffered steep derivatives losses.

Shares of Global dropped more than 5 percent on Tuesday despite an uptrend on the Kuwaiti bourse, as concerns on the firm's ability to pay back its debt weigh.

Global, which has $3 billion in debt, was downgraded by two rating agencies last week for allegedly not meeting debt obligations.

The stock has fallen almost 33 percent since the downgrading actions by Fitch Ratings and Standard & Poor's.

'They are trying to negotiate with banks regarding postponing an obligation of $200 million and this has put severe pressure on the share price,' said Rami Sidani, head of Mena Investments at Schroders Investment Management in Dubai.-Reuters