APICORP leverages preferred creditor status to launch A/B loan programme

Arab Petroleum Investments Corporation (APICORP), has launched an A/B loan structure to encourage international debt financing in its member countries, with limited access to foreign currency debt.

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.

Khalid Ali Al-Ruwaigh, CEO 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 mobilisation 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,” he added. 

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

In other news, APICORP launched an infra initiative in partnership with the Islamic Development Bank earlier this year, a $1bn private sector-focused programme which aims to finance strategic utility projects with limited access to international financing and address low private sector participation in funding energy projects.

Read: Apicorp and IsDB partner in $1bn infrastructure financing initiative

In more recent developments, APICORP has announced that Fitch Ratings has revised the outlook on its long-term issuer default rating (IDR) to positive from stable and affirmed the IDR at ‘AA.’

The key drivers for the revised outlook according to Fitch’s report reflected “steady improvements in key solvency and liquidity metrics over recent years” and its expectation that this trend will continue. Notably, the report noted APICORP’s usable capital-to-risk-weighted-assets (FRA) ratio of 52 per cent and equity-to-adjusted-assets ratio of 32 per cent, both of which are “well above the ‘excellent’ thresholds of 35 per cent and 25 per cent, respectively.”