Debt Finance 2026 Comparisons

The debt finance market in the Kingdom has seen strong momentum over the past year, ushered and supported by the investment in line with Vision 2030. The Kingdom has seen tremendous activity in the power, energy, infrastructure, and water sectors in the past year. The future also holds a strong pipeline of work in real estate, logistics, tourism, mining and industrial development, with a strong push towards private sector participation. With emerging sponsors and borrowers in the market, the demand for debt has only increased for both corporate and project-related financings, although market participants continue to be selective in assessing credit quality, sponsor strength, sector exposure and transaction structure.

Local banks and financial institutions have been the primary providers of debt finance in the Kingdom, especially in corporate lending, project finance, real estate finance, working capital facilities and Shariah-compliant structures. Local banks enjoy the distinct advantage of unmatched regulatory knowledge and longstanding relationships within the market (including with regulators), which make them central to most domestic financings.

The past year has also witnessed a surge in regional and international banks and financial institutions, particularly for large-ticket, cross-border, sponsor-led or project-related financings. The Saudi government has encouraged and welcomed regional and international lenders’ participation in the Kingdom, which has consequently brought advancements in international documentation standards and sustainability standards, and additional structuring experience. Participation from international lenders has also highlighted a focus on Saudi law-governed securities, enforcement and regulatory approval processes.

Direct lenders and debt funds are less dominant than banks in the Saudi market, but they are becoming more visible in certain segments, particularly where borrowers seek alternative funding sources, acquisition finance, mezzanine-style capital or more flexible credit solutions. Their participation remains subject to Saudi regulatory considerations and the availability of appropriate structuring routes.

Government-related entities, public investment vehicles and development finance institutions also play an important role in strategic sectors. Also of crucial importance in shaping the lending market in the Kingdom are the sponsors, borrowers or providers of credit support.

While the war in Ukraine, global interest rates and trade tariffs have affected the Saudi debt finance market mainly through pricing, diligence and execution considerations rather than by causing a broad reduction in market activity, the recent conflict in the Middle East did, quite notably, induce temporary slow-downs due to regional uncertainty. That said, the Saudi lending market has proved itself to be quite resilient as Saudi Arabia has continued to see significant financing demand, particularly in sectors linked to national development objectives.

Higher global interest rates have increased the cost of borrowing and encouraged borrowers to consider tenor, hedging, refinancing flexibility and alternative funding sources more carefully. Lenders have placed greater emphasis on debt service capacity, financial covenants, project resilience and downside-case modelling. In cross-border financings, geopolitical developments have also increased sanctions, anti-money laundering, supply chain, procurement and counterparty diligence.

Trade tariffs and supply chain disruption are particularly relevant for project finance, construction, manufacturing and infrastructure transactions. Lenders may focus more closely on construction timelines, procurement contracts, price escalation, contractor creditworthiness and force majeure provisions. Some of these changes are likely to persist, particularly enhanced diligence, more robust risk allocation and greater attention to supply chain and geopolitical risk in transaction documentation.

The main types of debt finance transactions in Saudi Arabia include corporate lending, project finance, real estate finance, acquisition finance, working capital facilities, asset finance, trade finance, Islamic finance facilities and sukuk issuances. Project finance remains particularly significant due to the scale of infrastructure, utilities, renewable energy, water, industrial and public-private partnership activity in the Kingdom.

Corporate lending is commonly provided on a bilateral or syndicated basis and may be conventional or Shariah-compliant. Acquisition finance is becoming more prominent as private sector consolidation and investment activity increase. Real estate finance remains active, particularly in connection with large developments and mixed-use projects. Receivables financing is less developed than traditional bank lending but is increasingly relevant as the market matures and borrowers look for alternative liquidity and balance sheet management tools.

Islamic finance remains a central feature of the market. Commodity Murabaha, Tawarruq, Ijara, Wakala and other Shariah-compliant structures may be used depending on the nature of the financing, the assets involved and the requirements of the relevant Shariah committees.

Debt Finance Transactions

Debt finance transactions in Saudi Arabia are commonly structured as bilateral facilities, syndicated facilities or capital markets instruments such as sukuk. The appropriate structure depends on the size of the financing, borrower profile, sector, currency, tenor, security package, regulatory considerations and lender appetite.

Most Common Forms of Bank Loan Facilities in the KSA

Some of the most common forms of bank loan facilities in KSA include term loans, revolving credit facilities, working capital facilities, bridge facilities, project finance facilities, acquisition finance facilities, trade finance facilities and Islamic facilities structured through Murabaha, Tawarruq, Ijara or Wakala arrangements. In the cases where local banks form a significant part of the lender group, there is also a strong adherence to Shariah compliant facilities and products.

Main Advantages and Disadvantages of Syndicated Bank Loans Versus Debt Securities in the KSA

Syndicated bank loans are commonly preferred for larger financings as they allow a syndicate of banks to participate on the basis of common feasibility considerations, due diligence and documentation while also diluting exposure for lenders and providing flexibility for disbursements, covenants and amendments. These are more commonly seen across project finance, acquisition finance and larger corporate finance transactions. However, such large syndicate financings also result in more complex negotiations, intercreditor arrangements, agency appointments, cross-border security arrangements and voting criteria, and potentially higher costs.

In case of debt securities, the most common of which are sukuk financings in the KSA, there is a wider investor base that often proves to be favourable to larger issuers seeking capital markets funding over a longer term. Sukuk issuances, however, result in greater disclosures, increased regulatory supervision, rating and listing considerations, and stricter execution requirements than bank loans. Furthermore, relative to bank loans, they may be difficult to amend following issuance.

Types of Investors That Participate in Bank Loan and Debt Securities Financings

Key players in bank loans are mainly the local banks, regional and international banks and financial institutions (including development finance institutions). In the case of debt securities, participants may include banks, asset managers, insurance companies, sovereign or quasi-sovereign investors, and other institutional investors.

Transaction documents may vary depending on the structure (eg, bilateral or syndicated) and nature (conventional or Islamic Shariah-compliant) of the financing. For most conventional or syndicated lending transactions, the documents would include loan agreements or facility agreements, onshore and offshore security documents, corporate or bank guarantees, promissory notes, fee letters and conditions precedent such as corporate authorisations and legal opinions.

In case of Islamic financings, the documents may vary depending on the structure (eg, Murabaha, Tawarruq, Ijara or Wakala), but would be accompanied by an agency agreement, sale and purchase undertakings, fee letters, onshore and offshore security documents, corporate or bank guarantees, promissory notes, and conditions precedent such as corporate authorisations and legal opinions.

Common forms of security documents include the bank account pledge, pledge over plant and equipment, assignment of contracts, assignment of insurances, receivable assignments, pledge over shares, real estate mortgages, bank or corporate guarantees and promissory notes. In case of project finance transactions, additional documents may include sponsor support agreements and direct agreements.

The type of investor significantly affects the terms of a loan facility. Local banks prefer Saudi law as the governing law of the transaction documents, with local security packages and Shariah-compliant terms and conditions, whereas foreign banks and financial institutions prefer foreign governing law and dispute resolution mechanisms, detailed representations, warranties and undertakings, robust sanctions provisions, anti-corruption language, information covenants and transfer mechanics.

Islamic banks largely focus on Shariah requirements, including the relevant asset, commodity, agency or sale mechanics. In mixed conventional and Islamic syndicates, the documentation may need to include parallel conventional and Islamic tranches or a structure that allows both types of lenders to participate on acceptable terms.

In case of debt securities, institutional investors generally focus on disclosures, ratings, listing requirements, transferability and investor protection mechanics.

In case of a cross-border loan transaction, lenders primarily focus on ensuring that the Saudi obligors have the capacity, corporate power and authority to enter into and perform the loan documentation, including providing securities, and providing undertakings to adhere to foreign law as the governing law and foreign dispute resolution mechanisms.

In case of provision of local law-based securities, lenders ensure that the security is perfected across the relevant platforms and registries in the KSA, and that where required, direct or indirect possession is taken, and notices of security have been provided to the relevant counterparties.

Lenders also usually ensure that the local obligors possess the relevant regulatory approvals, governmental consents and authorisations, sector-specific licences, relevant concessions, and necessary easements and access rights to undertake and perform their business operations.

In most conventional lending transactions in the KSA, the typical security package includes bank or corporate, performance-related or payment-related guarantees, promissory notes, and security over movable or immovable assets. For project finance transactions, lenders would ensure security over project-related assets, assignments over offtake or concession arrangements, insurances, contracts, movable assets and direct agreements with counterparties to ensure step-in rights to cure defaults.

Types of assets over which security is provided in the KSA commonly include share pledge, account pledges, receivable assignments, assignment over insurances, assignment over contracts, pledge of plant and equipment, and mortgage over immovable property.

For perfection requirements and formalities over movable assets, the Kingdom has a specifically tailored law that provides the relevant security perfection mechanism. Movable assets are generally registered on the Unified Register for Rights on Movable Assets (the “Unified Register” – URRMA), which is an electronic platform whereby the beneficiary is required to register the security interests for security perfection. In case of share pledges, depending on the nature of the shares, perfection is achieved by way of:

• registration over the Unified Register;
• annotation on the shareholder register and physical share certificates; or
• submission of statutory forms ordained under the Implementing Regulations to the Companies Law.

In case of perfection of security over bank accounts, a notice of “deemed possession” from the account bank is imperative. Contractual assignments usually require a notice of assignment to be furnished from the security provider to the relevant counterparty.

Mortgage of immovable property in the KSA requires the title documents to be in compliance with the real estate laws of the KSA, and registration with the real estate register supported by the relevant corporate approvals, powers of attorney and notarisation requirements.

Agent and Trust Concepts

Trusts are not generally recognised in the Kingdom; therefore, in case of security provision in favour of bilateral lending transactions, security is directly created in favour of the local or foreign lender. In case of syndicated lending transactions, lenders usually appoint an onshore security agent to hold security in the KSA.

Parallel Debt

Parallel debt is not recognised in the Kingdom; however, in case of cross-border transactions governed by foreign law, the parallel debt structure may be used.

Restriction on Upstream Security

There is no restriction in the KSA over the issuance of security against loans granted to parent companies, and upstream securities are quite commonly structured in loan transactions. However, there is a restriction on issuance of an upstream payment guarantee in the KSA. As per the provisions of the Companies Law, distributions made to a shareholder may only be from distributable profits; therefore, any payment made by a subsidiary in lieu of payment guarantee issued against the payment obligations of its shareholder must be made from distributable profits.

Corporate Benefit

Managers and directors of a company in the KSA are obligated to ensure that there is corporate benefit to a company in entering into and executing a transaction. This becomes an integral part of the issuance of corporate authorisation, whereby the managers and directors are required to document and ensure such benefit before the issuance of corporate resolutions.

Financial Assistance

This is specifically relevant in case of acquisition finance transactions, where careful consideration is required to structure such transactions. While the KSA does not have a single unified financial assistance regime, courts may still review transactions through such lens.

Guarantee Fee

There are no mandatory statutory guarantee fees payable in the KSA for the provision of guarantees.

Intercreditor arrangements are prevalent in debt financings in the KSA, especially in cases of debt sell-downs and shared security. These are commonly found in project finance, acquisition finance, sukuk and bank debt combinations, and restructurings.

An intercreditor agreement would usually be a part of the documentation for debt finance transactions regulating payment priorities, enforcement controls, sharing of recoveries, amendment rights, release mechanics and the relationship between senior and subordinated creditors.

Where Saudi security is involved, lenders will ensure that the intercreditor mechanics are consistent with the onshore security documents, perfection requirements and enforcement mechanisms.

Contractual subordination is quite commonly found in financings in order to regulate the priority of payments between different classes of lenders (which may include senior lenders, equity bridge loan lenders and sponsor support providers). Creditors usually structure these dynamics under an intercreditor agreement or subordination deed.

Legal subordination is more relevant in cases of insolvency proceedings and is not usually contemplated or structured under transaction documents. As per the KSA Bankruptcy Law, certain creditor claims, enforcement expenses, employee claims, tax or governmental claims, secured claims and insolvency-related costs may receive preference under applicable law that overrides or affects contractual arrangements. Accordingly, contractual subordination is drafted on the basis that it regulates the conduct and rights of the contracting creditors, but does not necessarily bind third parties or override mandatory law.

Different classes of creditors may have different rights depending on whether they are secured, unsecured, subordinated, structurally subordinated or beneficiaries of guarantees. Secured creditors will generally have stronger recovery prospects against the secured assets, subject to applicable enforcement procedures and insolvency restrictions.

The enforcement of security in Saudi Arabia rests on a fundamental procedural concept: a creditor does not enforce merely because a borrower has defaulted under a finance document. The creditor must usually proceed on the basis of an enforceable instrument evidencing a certain, due and payable obligation.

Under the current Enforcement Law issued by Royal Decree No M/53 dated 13/8/1433H (3 July 2012), enforceable instruments include, among others, court judgments, arbitral awards, settlement deeds, promissory notes, bills of exchange, cheques, notarised contracts and acknowledgments, and certain foreign judgments or instruments once recognised in Saudi Arabia. This concept remains central under the New Enforcement Law issued by Royal Decree No M/237 dated 3/11/1447H (20 April 2026). At the time of writing, the New Enforcement Law has been published in Umm Al-Qura, the Saudi Official Gazette, on 1 May 2026 and will come into force 180 days after publication. Until that effective date, the current Enforcement Law remains applicable.

In practical banking enforcement, Saudi lenders have traditionally relied heavily on promissory notes as a parallel enforcement tool, rather than as security in the strict proprietary sense. A valid promissory note gives the lender a direct route to the Enforcement Court without first commencing substantive proceedings to establish the debt. Under the New Enforcement Law, promissory notes and bills of exchange will qualify as enforceable instruments only if registered on approved national electronic platforms. As a transitional rule, qualifying instruments issued before the New Enforcement Law comes into force remain enforceable for one year after it becomes effective, even if not electronically registered.

The general enforcement process is now largely electronic. The secured creditor files an application before the Enforcement Court through the Ministry of Justice platform, supported by the enforceable instrument, the security documents and details of the claim and the debtor. The Enforcement Court does not re-open the merits of the underlying transaction; it verifies whether the enforceable instrument satisfies the formal statutory requirements.

Under the New Enforcement Law, if the debtor fails to perform within five business days from notification, compulsory enforcement begins. If the debtor provides a sufficient bank guarantee, they are granted an additional ten business days. Enforcement measures may include asset disclosure, attachment of existing and future assets, attachment of receivables, freezing and enforcement against bank accounts, tracing of assets where there are indications of concealment, and sale of attached assets. Public authorities, asset registries and regulated entities are required to co-operate within statutory time limits.

Real Estate

Enforcement of registered real estate mortgages is governed by the Registered Real Estate Mortgage Law issued by Royal Decree No M/49 dated 13/8/1433H (3 July 2012), together with the Enforcement Law. A registered mortgage gives the mortgagee a real right and priority over sale proceeds according to its rank, but the mortgagee cannot appropriate the property in satisfaction of the debt; any clause to that effect is invalid, although the mortgage itself remains valid. The normal route is court-supervised sale, followed by distribution of proceeds. Under the New Enforcement Law, the auction award clears the sold asset from claims against the purchaser.

Movable Assets

Security over movable assets is primarily governed by the Law on Securing Rights over Movable Assets issued by Royal Decree No M/94 dated 15/8/1441H (8 April 2020) and its Implementing Regulations. The regime applies broadly to tangible and intangible movable assets, including equipment, inventory, receivables, bank accounts and contractual rights. Perfection against third parties is usually achieved by registration in the Unified Register for Rights over Movable Assets, although possession or control may be relevant for certain asset classes. Priority is generally driven by perfection and timing, not the date of signing the security agreement. Enforcement may be judicial or, where law and contract permit, non-judicial; in contested or multi-creditor situations, judicial enforcement remains the safer route.

Listed Shares

Listed shares are excluded from the movable assets security regime and are governed by the Capital Market Law and the rules of the Capital Market Authority (CMA) and the Securities Depository Centre. A pledge over listed shares should be recorded in the relevant register to be effective against third parties, and Saudi law permits more than one pledge over the same shares subject to applicable priority rules. Direct sale through a capital market institution may be available in specific contexts such as margin lending. Where court enforcement is used, the New Enforcement Law requires sale in accordance with controls agreed with the CMA.

Bank Accounts and Receivables

Enforcement against bank accounts and receivables is typically conducted through attachment orders issued by the Enforcement Court, with banks and other relevant entities required to comply with disclosure and attachment orders. The New Enforcement Law strengthens this by requiring the implementing regulations to set out, in co-ordination with the Saudi Central Bank (SAMA), the rules for participation by banks and similar institutions in enforcement procedures.

Finally, secured creditors should assess enforcement risk alongside Saudi bankruptcy rules. If a bankruptcy procedure is opened, individual enforcement may be stayed or restricted under the Bankruptcy Law. This does not extinguish secured rights, but may require the secured creditor to act within the collective insolvency framework or seek specific court permission. The practical point is that effective enforcement in Saudi Arabia depends less on taking security at the last moment and more on having, from the outset, a valid enforceable instrument, properly perfected security and a clear route to the relevant asset.

Foreign judgments are not automatically enforceable in Saudi Arabia. A foreign judgment creditor must apply to the competent Enforcement Court. Once accepted, the foreign judgment is treated as an enforceable instrument, and ordinary Saudi enforcement measures may follow. The Enforcement Court does not re-hear the merits; its role is limited to verifying that the foreign judgment satisfies the statutory requirements for enforcement.

Under the current Enforcement Law issued by Royal Decree No M/53 dated 13/8/1433H (3 July 2012), and subject to applicable treaties and conventions, a foreign judgment may be enforced only on the basis of reciprocity. The Enforcement Court must be satisfied that:

• the Saudi courts do not have jurisdiction under the current statutory test;
• the foreign court had jurisdiction under its own rules;
• the parties were properly notified and given an opportunity to defend;
• the judgment is final and enforceable;
• the judgment does not conflict with an existing Saudi judgment in the same subject matter; and
• the judgment does not violate Saudi public policy.

The application is typically filed electronically and should be supported by the original judgment or a certified copy, evidence that the judgment is final and enforceable, proof of service where relevant, legalisation of the foreign documents and a certified Arabic translation.

Where applicable, enforcement may also proceed under relevant treaties and conventions, including the Riyadh Arab Convention for Judicial Cooperation and the GCC Convention on the Enforcement of Judgments, Delegations and Judicial Notices. Foreign arbitral awards are generally dealt with under the New York Convention, and mediated settlement agreements may fall within the Singapore Convention where applicable.

Saudi public policy is an important practical filter closely connected to Sharia principles. As a result, express interest or usurious amounts awarded in a foreign judgment may not be enforced, and punitive damages may be refused or severed to the extent considered inconsistent with Saudi public policy.

Saudi New Enforcement Law, issued by Royal Decree No M/237 dated 3/11/1447H (20 April 2026), preserves the same basic approach but clarifies the statutory conditions: in particular, it provides that enforcement should not proceed where the dispute falls within the exclusive jurisdiction of a Saudi judicial authority, or where an earlier similar action was already pending in Saudi Arabia before the foreign proceedings were filed. This appears to narrow and clarify the Saudi jurisdiction objection compared with the previous wording. The New Enforcement Law also expressly confirms that foreign judgments, arbitral awards, settlement agreements and notarised instruments may qualify as enforceable instruments if they satisfy the relevant statutory requirements.

Saudi law does not provide a formal non-insolvency rescue or reorganisation procedure with collective effect against all creditors or that creates an automatic moratorium on enforcement. Outside the Bankruptcy Law, restructuring is primarily contractual: standstills, forbearance, amend-and-extend arrangements, rescheduling, covenant resets, new money, additional collateral or consensual settlements. These bind only their parties; they do not bind non-consenting creditors, prevent acceleration, or stop enforcement of a guarantee or security unless the relevant lender has agreed to that restriction.

Corporate law tools may also support a rescue – capital increases or reductions, mergers, asset disposals, shareholder support or the introduction of a new investor under the Companies Law – and may give creditors objection rights or rights to payment or adequate security. They do not, however, impose a general stay or force lenders to extend maturities, reduce debt or release security.

The procedures with direct statutory effect on lenders’ enforcement rights are found in the Bankruptcy Law issued by Royal Decree No M/50 dated 28/5/1439H (14 February 2018) and its Implementing Regulations issued by Council of Ministers Resolution No 622 dated 24/12/1439H (4 September 2018). The principal rescue procedures are Protective Settlement and Financial Restructuring, including the simplified versions for small debtors. For these purposes, a “small debtor” is generally a debtor whose total debts do not exceed SAR2 million when the relevant procedure is commenced.

Protective Settlement

Protective Settlement is the lighter procedure. It is debtor-led and allows the debtor to remain in control of its business while seeking creditor approval of a proposal. There is no automatic stay; the debtor must apply to the court for a claims moratorium, which may last up to 90 days and be extended, but the total period may not exceed 180 days.

During the moratorium, lenders are generally restricted from commencing or continuing claims or enforcement against the debtor, its assets and assets forming part of the bankruptcy estate provided as security, except with court approval. This may also affect action against personal guarantors or providers of in rem security to the extent specified in the Bankruptcy Law. A secured creditor may seek court permission to enforce against the secured asset, particularly where enforcement would not prejudice the continuation of the debtor’s business or the approval of the proposal, or where refusal would cause material harm to the secured creditor that outweighs harm to the debtor and other creditors.

Financial Restructuring

Financial restructuring, the more comprehensive rescue procedure, is conducted under the supervision of a bankruptcy trustee. The debtor usually continues to manage its business, subject to trustee supervision. Filing the request for opening the procedure, or opening the procedure itself, triggers a moratorium for 180 days, extendable by up to a further 180 days. During this period, individual enforcement of loans, guarantees or security is generally restricted unless the Bankruptcy Law or the court permits otherwise.

Once approved and ratified, a financial restructuring plan may affect the repayment timing and manner, treatment of secured and unsecured claims, sale of assets, and use or realisation of collateral. It does not extinguish secured rights, but it may move a lender from individual enforcement into a collective court-supervised process. Lenders should monitor classification, valuation of collateral, treatment of secured claims, voting thresholds and compliance with fairness standards.

Small Debtor Procedures and Financial Markets Exception

Small debtor procedures follow the same policy with simplified mechanics. In a small debtors’ protective settlement, any moratorium does not apply to secured claims. In a small debtors’ financial restructuring, a moratorium may restrict enforcement in a manner closer to ordinary financial restructuring, subject to applicable statutory limits.

There are also important exceptions for financial markets. Close-out netting and related financial collateral arrangements for qualified financial contracts may receive statutory protection under Article 214 of the Bankruptcy Law and the SAMA Close-out Netting and related Collateral Arrangements Regulation, issued by SAMA Governor Resolution No 1/46 dated 18/8/1446H (16 February 2025). This is particularly relevant to banks and financial institutions using derivatives, hedging, collateral and netting arrangements.

In practice, restructuring outside the Bankruptcy Law is a matter of consent and does not stop enforcement unless the lender agrees. Under the Bankruptcy Law, rescue and reorganisation procedures may restrict enforcement of loans, guarantees and security without destroying secured rights. They change the forum, timing and strategy of enforcement. A secured lender must therefore act early, perfect its security before distress, monitor any moratorium, prove its claim, protect its secured status and seek court permission where enforcement of collateral is commercially necessary.

Insolvency in Saudi Arabia does not, by itself, extinguish the debt, the guarantee or the security. It may, however, change the route, timing and strategy for enforcement. Outside insolvency, lenders typically pursue individual enforcement: acceleration, demand, enforcement of an instrument, attachment, sale and recovery. Once a bankruptcy procedure is opened, or a moratorium applies, the lender is usually moved into a collective process supervised by the court.

The principal statute is the Bankruptcy Law issued by Royal Decree No M/50 dated 28/5/1439H (14 February 2018) and its Implementing Regulations issued by Council of Ministers Resolution No 622 dated 24/12/1439H (4 September 2018). For debt finance, the most relevant procedures are protective settlement, financial restructuring and liquidation.

Lenders’ Rights To Enforce a Loan, Guarantee or Security in Insolvency

As noted in the foregoing, the moratorium is the first issue for lenders, with timelines that differ between protective settlement (court-ordered, up to 180 days total) and financial restructuring (180 days on filing or opening, extendable by up to a further 180 days). During the moratorium, individual enforcement of loans, guarantees or security is generally restricted unless the law or the court permits otherwise.

A secured lender does not lose its secured status when a procedure is opened, but enforcement of the secured asset may require court permission. The secured creditor should ensure that its claim is filed in the relevant procedure and, where a trustee is appointed, that the security is clearly identified and the value and ranking properly reflected in the list of claims. Court permission to enforce may be granted where enforcement would not prejudice the continuation of the debtor’s business or the approval of a restructuring proposal, or where refusal would cause material harm to the secured creditor outweighing harm to the debtor and other creditors. In practice, this is the principal route for secured lenders to enforce during a bankruptcy procedure. In liquidation, the focus shifts from rescue to realisation; a moratorium applies, but the court may authorise a secured creditor to enforce against the collateral, and the lender’s position depends heavily on whether the security was validly created, properly perfected and not vulnerable to challenge.

Guarantees require careful treatment. The Bankruptcy Law’s moratorium may restrict proceedings not only against the debtor, but also against personal guarantors or providers of in rem security. Lenders should distinguish between accessory guarantees, third-party security and independent instruments such as bank guarantees or standby letters of credit. Independent demand instruments are usually treated by banking practice as autonomous obligations, but their treatment should always be assessed against the wording of the instrument and any applicable court order.

Claw-Back Risks

Claw-back risk is a central concern in Saudi insolvency. Article 210 of the Bankruptcy Law allows interested parties to challenge certain transactions entered into before the opening of the bankruptcy procedure. The suspect period is 12 months for transactions with unrelated parties and 24 months for transactions with related parties. The transactions most relevant to lenders include:

• disposals of assets, rights or security;
• transactions for no consideration or for less than fair value;
• early payment of debts, or payment of debts in an unfair manner;
• granting security for a pre-existing debt or a debt that was previously unsecured; and
• release of a debtor’s obligors.

Article 211 provides the court with remedial powers if the challenge succeeds: invalidation of the transaction, restitution, payment of fair value, reinstatement or replacement of security, or recovery of amounts transferred. There is also an important defence: the court should not invalidate the transaction if it is established that the transaction was in the debtor’s interest and that the debtor was not distressed or bankrupt at the time of the transaction.

For lenders, this makes evidence critical – valuation, commercial rationale, board approvals, solvency analysis, new value and contemporaneous documentation may be decisive. In practice, particularly sensitive transactions include late-stage collateral, preferential repayments, intra-group guarantees, shareholder support without clear consideration and amendments that improve one lender’s position shortly before a bankruptcy filing.

Equitable Subordination

Saudi law does not recognise equitable subordination as an independent doctrine in the US sense. There is no general rule allowing the court to subordinate a lender’s claim because the lender is influential, related to the debtor or commercially better informed; nor is there a developed standalone doctrine recharacterising debt as equity.

Saudi law addresses similar concerns through more targeted rules. Related-party transactions are subject to a longer claw-back period of 24 months, with a broad definition of “related party” covering directors, managers, owners, shareholders, relatives, controlling persons and entities under common control. In restructuring proposals, voting rules require support from non-related-party creditors where they exist, reducing the risk of insiders forcing a plan against independent creditors, and the court may refuse to ratify a proposal that breaches statutory fairness or unfairly prejudices a creditor.

The practical conclusion is that related-party debt is not automatically subordinated, but it is more vulnerable to scrutiny. If the debt is artificial, the security is late, the payment is preferential or the voting structure prejudices independent creditors, the issue is likely to be addressed through claw-back, voting controls or fairness objections rather than through equitable subordination as a standalone concept.

Order of Payment

The statutory order of payment is most important in liquidation. Procedure costs and expenses (trustee and expert fees, costs of realising assets) are addressed first. The waterfall then gives priority to secured debts from the proceeds of the secured assets – the core protection for secured lenders – followed by approved secured financing provided during the procedure, certain employee wage claims, family expenses, costs of business continuation, earlier wage claims, unsecured debts, and unsecured government fees and taxes.

If the proceeds of a secured asset exceed the secured debt, the surplus falls into the bankruptcy estate; if insufficient, the unpaid balance is treated as an unsecured claim. In restructuring procedures, the liquidation waterfall is not applied mechanically, but it remains an important reference point for creditor classification, fairness, treatment of secured claims and with respect to whether a plan unfairly prejudices a dissenting creditor.

Set-Off, Close-out Netting and Financial Collateral

Automatic set-off is treated differently depending on the procedure. In protective settlement, financial restructuring and the corresponding small debtor procedures, automatic set-off is prohibited after the opening of the procedure, subject to the protections applicable to qualified financial contracts. A restructuring proposal may, however, provide for set-off in respect of specified mutual debts or mutual dealings, provided they are between the same parties acting in the same capacities and with the same rights. The prohibition does not prevent the netting of amounts for voting purposes, and if the debtor calls on a creditor to perform an obligation, the creditor is required to pay only the net balance after deducting what it is owed by the debtor. In liquidation, small debtors’ liquidation and administrative liquidation, automatic set-off applies on opening in respect of mutual debts or dealings existing at that date. Regulated entities carrying out financial activities may also be subject to special multilateral set-off rules.

For banks and SAMA-supervised financial institutions, close-out netting and related financial collateral arrangements may receive statutory protection under Article 214 of the Bankruptcy Law and the SAMA Close-out Netting and related Collateral Arrangements Regulation, issued by SAMA Governor Resolution No 1/46 dated 18/8/1446H (16 February 2025). The SAMA framework applies where at least one party is subject to SAMA supervision and is designed to ensure the enforceability of qualified financial contracts both outside bankruptcy proceedings and following the commencement of bankruptcy proceedings. Where the protected framework applies, the relevant financial contract may enjoy a stronger position than ordinary lending arrangements affected by moratorium or claw-back rules. A parallel CMA framework, published in July 2025, applies where one of the parties is a capital market institution, further strengthening the regulatory architecture for close-out netting in Saudi Arabia.

Practical Impact for Lenders

In Saudi Arabia, a secured lender starts from a strong position, but that position may weaken if the security is unregistered, recently granted, vulnerable to claw-back or not actively protected during the bankruptcy process. The practical priorities are clear: create and perfect security before distress, evidence the secured claim properly, document any late-stage security or restructuring support with clear commercial justification, and act quickly once a procedure is opened by filing claims, proving secured status, monitoring proposed new financing and objecting if a proposal breaches fairness standards.

Stamp Duty

There is no stamp duty or registration tax on financing or security documentation in Saudi Arabia.

Corporate Income Tax

Saudi Arabia operates a dual-tax regime: corporate income tax at 20% on the non-Gulf Cooperation Council (GCC) ownership share of a resident entity and zakat on the GCC share. Non-residents are taxed only if they have a permanent establishment in the Kingdom or earn Saudi-source income. Interest paid by a Saudi borrower is treated as Saudi-source regardless of where the loan is negotiated, drawn or used. A permanent establishment risk may arise where loan negotiation, credit approval or relationship management is conducted in the Kingdom.

Withholding Tax (WHT)

Interest paid to a non-resident lender is subject to WHT at 5%. Saudi Arabia’s treaty network (over 50 jurisdictions) may reduce or eliminate WHT on interest, with the Zakat, Tax and Customs Authority (ZATCA) permitting automatic application of treaty rates if certain requirements are met.

Qualifying Lender Concepts

There is no formal qualifying lender regime. Eligibility for reduced WHT is determined by treaty availability and ZATCA’s requirements for residency certification and beneficial ownership.

Interest Deductibility

There is no fixed debt-to-equity ratio. The deduction for loan charges is capped at the lower of: (i) actual loan charges incurred or (ii) interest income plus 50% of taxable income. Disallowed amounts cannot be carried forward. Licensed banks are excluded. Highly leveraged structures may find a material portion of interest expense non-deductible.

Transfer Pricing

Related-party financing must satisfy the arm’s length standard. ZATCA may disregard excess interest, recharacterise debt as equity or deny the deduction where pricing does not reflect what independent parties would agree. The transfer pricing by-laws now extend to Zakat payers (since 1 January 2024). ZATCA is increasingly scrutinising intercompany financing.

VAT

Interest is exempt from VAT. Explicit fees (agency, commitment, prepayment) are subject to VAT at 15%, with non-resident lenders triggering the reverse charge mechanism.

Real Estate Transaction Tax

Enforcement of a mortgage over Saudi real estate triggers real estate transaction tax at 5% on the transfer of ownership.

The regulatory considerations in relation to debt financings in KSA may be divided between the lenders and the borrowers. Lenders are to consider licensing requirements pursuant to the banking regulation, finance company regulation, capital markets regulation, foreign investment rules and security registration requirements.

Banks and finance companies operating in Saudi Arabia are regulated by SAMA. Accordingly, lending activity, consumer finance, real estate finance, finance leasing, debt collection practices and outsourcing arrangements are subject to SAMA requirements. While unlicensed banks and financial institutions are not permitted to undertake banking business in the Kingdom, there are certain tolerated practices for foreign banks and financial institutions.

Debt securities and sukuk offerings are generally subject to CMA regulation, including offering, disclosures, listing and continuing obligations requirements. The regulatory analysis will depend on whether the offer is public, private, exempt, listed or unlisted, and whether a special purpose vehicle or sukuk structure is used.

Foreign investment registration may be relevant where non-Saudi shareholders or project sponsors participate in a transaction involving Saudi entities or Saudi-based investment activities, to the extent that such participation constitutes an investment under Saudi law.

Under the Investment Law issued by Royal Decree No M/19 dated 16/1/1446H (22 July 2024), which entered into force on 13/8/1446H (12 February 2025) and repealed the former Foreign Investment Law, the previous foreign investment licensing regime has generally been replaced by a registration requirement with the Ministry of Investment of Saudi Arabia through the National Register of Investors.

A foreign investor is required to register with the Ministry before engaging in any investment in Saudi Arabia, except for investments in securities that are subject to the Capital Market Law.

Additional approvals may still be required for activities that are prohibited or restricted under the list of excluded activities, and sector-specific licences or permits may apply depending on the nature of the activity.

Importantly for debt finance, the position of a foreign lender should be assessed separately. Loans, bonds, financing sukuk and other public or private debt instruments are expressly excluded from the definition of capital under the Investment Law. Accordingly, the mere provision of debt financing does not, in itself, make a foreign lender an investor subject to the registration requirement.

Sector-specific approvals may also be required in regulated industries such as energy, water, mining, telecommunications, healthcare, real estate, transport, insurance and financial services.

Security registration is another important regulatory consideration. Movable asset security may need to be registered on the Unified Register, while other types of security may require filings, notations, notices or registrations with different authorities or counterparties.

Several Saudi-specific and cross-border issues should be considered in debt finance transactions. Execution formalities are important, particularly for corporate approvals, powers of attorney, notarised documents, documents executed outside Saudi Arabia and documents that may need to be used before Saudi authorities or courts. Legalisation, translation and Arabic versions are required for admissibility and enforcement purposes in local courts of Saudi Arabia.

Use of proceeds should be reviewed carefully, especially where the borrower operates in a regulated sector or where the financing involves foreign lenders, government-related projects, Shariah-compliant facilities or capital markets instruments. In Islamic financings, the use of proceeds and transaction mechanics should be consistent with the approved Shariah structure.

Saudi security should be structured with attention to the identity of the secured parties, the secured obligations, registration requirements and enforcement mechanics. Foreign law and foreign jurisdiction clauses may be used in certain transactions, but enforcement in Saudi Arabia remains subject to applicable Saudi rules and public policy considerations.