Saudi Arabias biggest property developer, Dar Al Arkan, said the kingdoms public investment fund approved a 4 billion riyal loan to finance a Jeddah project.
The 400-hectare Qasr Khozam project, a town that is to include malls, hospitals and schools, is a joint venture between Dar Al Arkan and Jeddah Development and Urban Regeneration, a company owned by the municipality of Jeddah.
"This funding will contribute to the project by accelerating the development operations," the company said.
Dar Al Arkan rose 3.4per cent, its biggest advance since the start of last month, to 6.35 riyals on the Tadawul exchange yesterday.
The stock has lost more than 30 per cent so far this year on concerns that the company may struggle to pay 7.6bn riyals of debt due over the next five years, of which 5bn is due in the next two years.
Retail investors, who make up the bulk of trading in Saudi Arabia, said the news was a positive signal for the companys financial health, said Hesham Tuffaha, the head of asset management at Bakheet Investment Group,in Riyadh.
The company had 1.8bn riyals of cash and 1.7bn of short-term receivables, according to financial statements published during the second quarter.
"The receivables should move to cash during the third quarter," said Mostafa El Maghraby, an analyst at Global Investment House in Kuwait.
"The additional financing gives a strong signal they are being backed by the government, in one way or another, and that it would not allow them to default on their sukuks coming due," Mr El Maghraby said.
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