Image for illustrative purposes
Construction firm Saudi Binladin Group has secured a SAR 2.5bn ($667m) loan from local banks to ease its financial pressures, banking sources aware of the matter said on Wednesday.
Arab National Bank and Saudi British Bank are providing the loan, which Binladin is using to cover redundancy costs for workers it is laying off, back salaries and severance costs, the sources said.
The loan is one of several recent signs of relief for Binladin, one of the Middle East’s largest construction groups, which has faced severe financial problems since last year.
Binladin has declined to describe its financial situation publicly, but Gulf commercial bankers have said they believe it owes local and international banks a total of about $30bn, and some think it may have to restructure some of that debt.
In September, the Saudi government barred Binladin from bidding for new state contracts after one of its cranes fell in Mecca’s Grand Mosque during a storm, killing 107 people. This ban was not lifted until about three weeks ago.
A Binladin spokesman said in an emailed response to Reuters that the company doesn’t comment on its financial issues or relationships with business partners.
“We remain focused and committed to carry out our promise and deliver the contracted projects to the highest standards and satisfaction of our clients, as we have always been doing.”
Two of the sources, declining to be named because of commercial sensitivities, said Binladin had pledged land as collateral for the loan. They did not elaborate on the size or location of the land, or how long the loan was for.
Bankers with knowledge of the loan said the inclusion of the collateral pledge was linked to persistent concerns about the Saudi construction sector.
“Nobody in their right mind would lend unsecured at the moment to a contractor,” said one.
Binladin has been hit by a general slump in construction as the government has cut spending in response to low oil prices. Many builders in Saudi Arabia have reported shrunken ministry budgets and delays in payments by the state for projects.
Since last year Binladin, which before the crisis had a workforce fluctuating around 200,000 to 250,000, has cut about 69,000 jobs, including resignations and departures that will occur by early June. Some of its workers have not been paid for months, and have staged public protests.
When the government lifted the ban on bidding for state projects, it also removed a travel ban imposed on top Binladin executives after the disaster. Days later, Binladin made delayed salary payments to some 10,000 workers.
The Binladin spokesman confirmed earlier this week that there were unresolved “disagreements” with the government over payments at the King Abdullah Financial District project, where work by the company has been halted since early 2016.