Al Rajhi Steel, Saudi Fransi in $720m financing deal

Mohamed Abdulaziz Al-Rajhi & Sons Industry Holding will sign tomorrow an agreement with Banque Saudi Fransi for a $720 million (Dh2.64bn) financing for the expansion of its Saudi steel operations.

The privately-owned holding said in a statement the agreement appointed the French Calyon's affiliate, as financial advisor and arranger for the financing.

The size of the loan may change "depending on the requirements of the credit market", the firm said. A spokesman for the holding said: "The financing is currently being arranged by Fransi." He could not say when it would be finalised.

The owners of Mohamed Abddulaziz's Holding are related to the main owners of Al-Rajhi Bank. The holding needs the cash to help finance expanding its Rajhi Steel Industries' subsidiary.

"The company will immediately start building the new reinforced steel plant in Jeddah with a production capacity of one million tonnes per year," the holding said in the statement.

The expansion will cost a total of four billion riyals and will more than double its production capacity by as early as 2012.

Rajhi Steel's Chief Executive Mehdi bin Nasser Al-Qahtani told Reuters in August that his firm was expecting an equity injection from the holding's owners and loans from state-run Saudi Industrial Development Fund and other banks.

Many projects in the Kingdom have been delayed because of scarce financing as the global financial crisis forced local banks to opt for greater caution on lending until visibility improves.

On Wednesday, property developer Jabal Omar Development said its appointed financial advisor Jadwa Investment failed to arrange a $3.3bn financing within the agreed deadlines for a property project near the holy shrines at Makkah.

However, Saudi Arabia's Al Ittefaq Steel Products, part of the local Al Tuwairqi Group, is in talks with 26 banks to restructure more than $1bn (Dh3.67bn) in loans, Meed reported.

Al Ittefaq is seeking to restructure its debt as its finances have suffered amid a steep drop in steel prices, a slowdown in the construction market and the ban on excess inventory exports, it said, citing bankers in the Kingdom. The steel company hopes to finalise talks by the end of the month with banks including National Commercial Bank, Samba, Al Rajhi, Saudi Hollandi Bank, National Bank of Kuwait, and Standard Chartered Bank.

Al Ittefaq in December announced that 1,800 of its 2,145 workers were being sent on leave without pay from January 1.

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