Credit squeeze hits Makkah project
Jeddah, April 29, 2009
A Saudi firm said on Wednesday it could not secure $3.3 billion financing for a property project near holy shrines in Makkah, in a fresh sign of the impact of the global financial crisis on the kingdom.
Jabal Omar Development Co hired private investment bank Jadwa Investment in July to arrange the 12.4 billion riyals financing for its giant real estate project near the Grand Mosque on some of the world's most lucrative land plots.
"Jabal Omar Development Co announces that it has terminated the contract with Jadwa Investment... for having not been able to secure financing within the deadlines they have promised," Jabal Omar said in a statement posted on the Saudi bourse's website.
The agreement provided for Jadwa to secure both long-term financing through the issue of a sukuk -- the Islamic alternative to conventional bonds -- and short-term financing.
Officials at Jadwa could not immediately comment and a spokesman said a statement would be issue later on Wednesday.
In another statement, Jabal Omar said it would propose the issue of a sukuk to its shareholders on June 10.
Jabal Omar raised $537 million by selling a 30 percent stake in an initial public offering in November 2007 even before starting works at the project.
The remaining 70 percent of the company is held by the owners of a 23 hectare (56.8 acre) plot of land in Makkah across a main street from the Grand Mosque.
"The size of the financing is big but again this is a real estate project in Makkah, (involving) millions of pilgrims," said Turki Fadak, head of the Arab Centre for Financial Consultancy.
"The economic conditions and the global crisis may have turned banks off lending," he added.
Jadwa, which was licensed by Saudi regulators in 2006, has said the Jabal Omar financing was its largest ever.
The bank's founding partners include a prominent Saudi royal, Saudi billionaire Mohammed Ibrahim Al-Issa and well-known Saudi firms.
In October, Khazanah Nasional Berhad, the investment arm of the Malaysian government, paid $76 million for a 10 percent stake in Jadwa. - Reuters