APICORP landmark SAR 2 billion debut bond oversubscribed three times

APICORP landmark SAR 2 billion debut bond oversubscribed three times
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Published October 20th, 2010 - 12:21 GMT

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Riyadh
,
Ahmad Bin Hamad Al-Nuaimi
,
UAE government
,
Organization of Arab Petroleum Exporting Countries

The Arab Petroleum Investments Corporation (APICORP), a Multilateral Development Bank owned by the ten member states of the Organization of Arab Petroleum Exporting Countries (OAPEC), today announced that its debut Saudi Arabian Riyal (SAR) 2 billion bond was oversubscribed three times, clocking an aggregate book size of SAR 6 billion (USD 1.6 billion). The SAR bond, rated A1 by Moody's, marks the first such foray in the Kingdom by a Multilateral Development Bank. The UAE government owns a 17 % stake in APICORP.

Priced at 110 basis points over the Saudi Interbank Offered Rate (SIBOR), the five-year bond witnessed extraordinarily high demand from investors in a remarkably short book-building period, resulting in a price that was tangibly at the lower end of the range. The bond which is callable after three years at the option of APICORP is the first such structure in the Saudi capital markets. Registered on Tadawul, the bond pays a quarterly coupon.

Ahmad Bin Hamad Al-Nuaimi, Chief Executive and General Manager of APICORP said, "The overwhelming response to our first foray into the debt capital markets affirms investors' confidence in APICORP's long-term financial stability, profitability and credit quality. The SAR bond saw exceptional demand from a varied investor audience and this appetite for a first time issuer is the result of APICORP's robust balance sheet and sustainable track record since establishment."

APICORP enjoys a risk-weighted capital adequacy ratio of 26.4%, one of the highest among A-rated commercial banks in Saudi Arabia and GCC. APICORP boasts an extremely low leverage ratio of 3.1x and non-performing loan (NPL) ratio of 0.7 %, one of the lowest among Saudi banks.

Commenting further on the success of the bond issue, Mr. Al-Nuaimi added, "The enthusiastic and swift response from risk-averse, sophisticated investors is a testament to our sound and compelling route-to-market strategy. They have recognized the rare opportunity that we offered with this inaugural bond. Historically, APICORP has always succeeded in securing competitive financing due to its impressive credit profile but the investor feedback for our SAR bond has been unprecedented and we are highly encouraged by the endorsement from the investor community. The proceeds of the bond will be used to further strengthen our financing and equity portfolio in the region's oil and gas industry, which has an estimated investment potential of $615 billion."

APICORP's SAR bond was placed with institutional investors in October via an issuance coordinated by Credit Agricole Corporate and Investment Bank and the joint lead managers and book runners, Calyon Saudi Fransi Limited; GIB Financial Services L.L.C.; HSBC Saudi Arabia Limited; and Samba Capital & Investment Management Company Limited.

Mr. Al-Nuaimi said, "I would like to take this opportunity to thank all government organizations, financial institutions, companies that have contributed to the success of our landmark debut bond. I also thank the co-coordinating bank and the joint lead managers and book runners for the professional and smooth execution of this landmark transaction."

During a two week road show, the bond saw outstanding demand from a wide range of investor audience including government agencies, bank treasuries, corporate treasuries and insurance companies. Though the transaction was essentially marketed to Saudi-based investors, it also attracted interest from other GCC investors due to APICORP's status as a Multilateral Development Bank supported by the shareholder countries of OAPEC.

A spokesperson on behalf of the Coordinating bank and Joint lead managers said, "Maintaining such strong ratios and credit profile in a difficult global financial environment clearly demonstrates APICORP's intrinsic financial strength, sound risk management policies and prudent investment strategy. This inaugural issue has seen a strong interest from the diversified investor base in Saudi Arabia. We are proud to have been a part of this landmark transaction and delighted to have advised and supported APICORP in coordinating and lead managing and book running its inaugural bond issue."

APICORP obtained a strong backing for its credit profile in June when it received a first-time issuer rating of A1 from Moody's Investors Service for long-term debt and Prime-1 for short-term debt. The multilateral bank reported a net income of US$47 million for the first six months of 2010, a 95% rise over the same period last year, and for the 12 months ending 2009 it reported a net income of US$59 million, a 111% rise over same period in 2008. As a multilateral development bank, APICORP enjoys a de facto preferred creditor status. 

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