UPDATE 1-Abu Dhabi airport contractors near $1.1 bln finance deal- sources

Wed Aug 8, 2012 6:45pm IST

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* Mashreq, First Gulf Bank, Al Hilal among banks on deal

* Financing to be 80 pct sharia-compliant, 20 pct conventional

* Deal is second big sharia-compliant regional project finance deal in Aug

* Islamic financing facility for Medina Airport signed in Aug (Adds details, interview with TAV Airport)

By Bernardo Vizcaino and Praveen Menon

DUBAI, Aug 8 (Reuters) - The consortium building Abu Dhabi's new airport terminal is close to securing a 4-billion dirhams ($1.1 billion) financing deal, which will be mainly sharia-compliant, banking sources said on Wednesday.

A deal would mark the second major regional project finance venture to rely on Islamic financing facilities this month.

Turkey's TAV Insaat, Dubai's Arabtec Holding and Athens-based Consolidated Contractors Co. were awarded a $2.9-billion contract in June to build a mid-field terminal in the emirate.

Dubai lender Mashreq is leading the financing deal which includes First Gulf Bank, Union National Bank , Al Hilal Bank, all from Abu Dhabi, and Jordan's Arab Bank, said two banking sources close to the deal who declined to be identified.

The financing will be 80-percent sharia-compliant with the remainder secured via a conventional loan, the sources said. The four-year contractor finance facility will see all banks provide roughly equal amounts.

An official at Tav Airports confirmed the use of Islamic financing but declined to give further details on the deal.

"We are indeed using Islamic finance for our Abu Dhabi project. Details of the financing are to be released later," Burcu Geris, Project and Structured Finance Coordinator at TAV Airports, said in an emailed statement.

TAV Insaat is a unit of Turkish builder Akfen Holding , which holds a stake in airport operator TAV Havalimanlari.

It marks the second time this month that TAV has turned to Islamic finance to fund its joint projects in the region.

Last week, a consortium including TAV said it had secured a $1.2 billion sharia-compliant facility for Saudi Arabia's Medina Airport project.

"Islamic finance through Saudi banks was our first option for financing in Medina Airport," Geris said. "It only came as a natural choice since Saudi banks are both very liquid and very much experienced in structuring and providing Islamic finance facilities.

Saudi British Bank, National Commercial Bank and Arab National Bank were lead arrangers, with National Commercial Bank serving as the Islamic structuring bank.

The Medina Airport project, which also includes Saudi Oger and Al Rajhi Holding Group, is slated to be completed in the first half of 2015.

Islamic project financing in the Gulf Arab region can be complicated because foreign ownership rules can restrict assets being pledged for such deals.

In the Medina Airport transaction, the largest of the three tranches, worth $719 million, used intangible assets in the form of contractual rights which were transferred to the lead arrangers instead of physical assets.

"We believe this is a model which could be used on other PPPs (public private partnerships) in the region where it is not possible to own key infrastructure assets," Geris said. (Additional reporting by Humeyra Pamuk and David French; Editing by Amran Abocar)