Alwaleed's Kingdom Holding plans up to $500 mln loan - sources

* New loan to refinance existing debt - source

* Kingdom considered bond issue but backed out - source

* Several local and international banks arranging loan

By Dinesh Nair and David French

DUBAI, Oct 7 (Reuters) - Saudi Arabia's Kingdom Holding, the investment vehicle of Prince Alwaleed bin Talal,is planning to raise up to $500 million from a syndicated loan,with the proceeds largely to refinance existing debt, threebanking sources said.

Kingdom, which has minority stakes in some of the world'stop companies including Citigroup Inc , had initiallyplanned a bond issue, but decided to go for the loan instead,one of the sources familiar with the matter said.

In June, sources told Reuters the investment firm had hiredDeutsche Bank and Banque Saudi Fransi forits maiden debt issue in the local bond market.

"The bond issue plan was definitely on and Kingdom hadsought out a rating to proceed with it but the plan was shelvedlater and they have now decided to go for the loan," a bankingsource familiar with the matter said, declining to elaborate.

"Most of it will be used to refinance existing debt."

The loan facility was expected to have a tenure of threeyears, a second banking source said.

Kingdom Holding was not immediately available for comment.An email sent to the investment firm seeking comment wasunanswered. The sources did not want to be named as the matterhas not been made public.

The investment firm has hired a number of local andinternational banks including, J.P. Morgan Chase Inc ,Deutsche Bank, Citigroup Inc, HSBC Holdings , StandardChartered , Royal Bank of Scotland , SambaFinancial Group , Banque Saudi Fransi and Saudi BritishBank for the loan facility, the sources said.

Historically-low interest rates and plentiful liquidity inthe local bank market have assisted Middle Eastern companies torefinance obligations, either in the loan or bond markets,allowing them to lock in competitive financing rates.

Kingdom raised $800 million from a syndicated loan in 2008,according to Reuters data. The investment firm is 95-percentowned by Prince Alwaleed, a nephew of Saudi Arabia's king and abillionaire thought to be worth about $20 billion.

Through his investment vehicle, Alwaleed also owns stakes inRupert Murdoch's News Corp and microblogging siteTwitter.

Kingdom said in July its second-quarter net profit rose 9.4percent as the value of its investments increased during theperiod.

(Additional reporting by Mirna Sleiman; Editing by Mark Potter)

((dinesh.nair@thomsonreuters.com)(+ 971 4 366 4265)(ReutersMessaging: dinesh.nair.reuters.com@reuters.net))