The Dubai government will partly guarantee the $1 billion loan which DIFC Investments will use to repay its $1.25 billion Islamic bond maturing in June, two sources said on Thursday.

The government support consists of a shortfall guarantee of up to $470 million, one of the sources familiar with the matter said, speaking on condition of anonymity as the information is not public.

'There are credit enhancements involving government support,' said a second source, adding the loan was set to be signed this weekend.

DIFC Investments' sukuk obligation, maturing June 13, has been highlighted by analysts as one of the most challenging refinancings in the Gulf Arab region this year, given the size of the maturity and the firm's limited cash position.

Shahli Akram Juma, managing director at DIFC Investments, wouldn't confirm either the government guarantee but said: 'We are on track to repay the sukuk in full and on time.'     

Pricing on the loan comes in line with facilities raised by other Dubai government-related entities in recent months, the sources said.

Emirates NBD, Dubai's largest lender, and Standard Chartered will input an equal amount to the deal, while Noor Islamic Bank and Dubai Islamic Bank, will also contribute a smaller commitment.     

The bond, along with a $2 billion Islamic bond from state-owned Jebel Ali Free Zone (Jafza) which matures later this year, is in the spotlight as investors weigh Dubai's refinancing risks in 2012.

DIFC Investments, whose assets range from aerospace to retail, made a net profit of $130.5 million last year compared to a net loss of $272 million in the previous year, after the impact of discontinued operations. - Reuters