Saudi's Al Fanar Co signs $800 million Islamic loan

Saudi’s Al Fanar Co signs $800 million Islamic loan

Al Fanar Company, a Saudi-based electrical engineering and electrical products manufacturer, has signed a 3 billion riyal ($800 million) dual-tranche Islamic loan, it said in a statement on Tuesday.

July 3, 2012 5:22 by Reuters

Al Fanar Company, a Saudi-based electrical engineering and electrical products manufacturer, has signed a 3 billion riyal ($800 million) dual-tranche Islamic loan, it said in a statement on Tuesday.

It is the first time the firm has completed a syndicated bank fundraising, the company statement said, with three banks – Banque Saudi Fransi, Samba Financial Group and National Commercial Bank – providing the cash.

Loan growth continues to be strong in the kingdom, up 14.7 percent year-on-year in May, according to figures from the Saudi Arabian Monetary Agency.

Saudi banks are benefiting from expansionary fiscal policies, ample liquidity and improving corporate loan demand, in particularly in the manufacturing, construction and services sector, according to a July 2 report from Deutsche Bank.

Al Fanar’s murabaha-structured facility was split between a three-year working capital tranche and a five-year Islamic term loan, carrying margins of 110 and 120 basis points over the Saudi interbank offered rate (Saibor) respectively.

A murabaha is a sharia-compliant cost-plus-profit arrangement.

($1 = 3.7502 Saudi riyals)

(Reporting by David French; Editing by Rachna Uppal)