APICORP leverages its Preferred Creditor Status and becomes MENA’s first financial institution to launch an A/B loan program

The Arab Petroleum Investments Corporation (APICORP), the region’s only energy-focused multilateral financial institution, has launched an A/B loan structure aimed at encouraging international debt financing in its Member Countries which have limited access to foreign currency debt.

The A/B loan structure, which was unanimously approved by APICORP’s General Assembly at its last meeting in Jeddah on April 24, makes APICORP the first financial institution in MENA to offer this type of loan, in line with its drive to support the energy sector in its less developed Member Countries and encourage private sector participation for a more sustainable energy ecosystem.

Leveraging its Preferred Creditor Status, the Corporation will offer the whole loan to the borrowing entity in two tranches, A & B, inviting commercial financial institutions from the private sector to participate in the B loan through a Participation Agreement. APICORP will lead negotiations and administer the whole loan and be the lender of record.

Commenting on the announcement, Khalid Ali Al-Ruwaigh, Chief Executive Officer of APICORP, said, “The new A/B loan is a significant addition to APICORP’s extensive range of innovative financial solutions to support the sustainable development of the region’s energy sector. In launching this new facility, we can offer our less developed Member Countries the largest diversified sources of financing possible to fund the sustainable transformation of their energy sector.”

“The new facility offers distinct advantages for all parties. Notably, B-loan participants from the private sector will enjoy unique privileges and immunities that APICORP has been granted by its Member Countries in its Establishing Agreement, including mitigating transfer and convertibility risks and certain tax benefits. This will encourage larger mobilization of funding from financial institutions who otherwise would not have participated for risk considerations, making A/B loans a very effective tool in helping APICORP achieve its sustainable development agenda on a commercial basis,” added Mr. Al-Ruwaigh.

A/B loan participants are typically credit and financial institutions which do not have the status of multilateral development banks (MDBs), such as commercial banks and national development financial institutions.

It is worth noting that APICORP launched the Infra Initiative in partnership with the Islamic Development Bank earlier this year, a USD 1 billion private sector-focused program which aims to finance strategic utility projects with limited access to international financing and address low private sector participation in funding energy projects.

Note to editor: Clifford Chance LLP advised APICORP on the legal and structural aspects of the A/B loan. The Clifford Chance team was led by Qudeer Latif – a partner in the firm's Dubai office.