DUBAI - Jabal Omar Development Company, one of Saudi Arabia's largest listed property developers, said on Sunday it has reached an agreement with one of its debt holders to convert 5.3 billion riyals ($1.41 billion) of debt into new shares.

Jabal Omar Development (JODC) said it will issue more than 225 million new shares "and in exchange will extinguish all debts" it owes to the Alinma Makkah Real Estate Fund and "settle all rights and obligations related to the Fund."

The company operates the Jabal Omar complex of hotels and residential and commercial property within walking distance of the Grand Mosque in the Muslim holy city of Mecca. It was hard-hit when the pandemic curtailed pilgrimages.

"This is the largest and most significant transaction within our comprehensive capital structure optimization plan," JODC'S CEO Khaled Al Amoudi said in a statement.

"It will free up SAR 540 million in cash and allocate it to more productive, value-enhancing use. We have turned a critical corner and are on an accelerated journey towards our next phase of growth."

JODC in October agreed to restructure a 4.7 billion-riyal loan from Saudi British Bank and Samba Financial Group, which is now Saudi National Bank (SNB) after its merger with National Commercial Bank. The facility was increased to 5.9 billion riyals and its maturity extended to 2030.

Saudi Arabia's finance ministry, which guaranteed 1.6 billion riyals in financing for JODC in March 2021, has previously told Reuters the company is developing projects of "strategic importance".

(Reporting by Yousef Saba; Editing by Susan Fenton)