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Apicorp gets stable outlook from Moody's

Dubai, June 8, 2010

Moody's Investors Service has assigned first-time issuer ratings of A1 (for long-term debt) and Prime-1 (for short-term debt) to the Arab Petroleum Investments Corporation (Apicorp). The ratings have a stable outlook.

Apicorp is a multilateral development bank (MDB), headquartered in Saudi Arabia. It was created in 1974 and is owned by the ten member states of the Organisation of Arab Petroleum Exporting Countries.

Its largest shareholders are the governments of Saudi Arabia (rated Aa3), the UAE (Aa2) and Kuwait (Aa2).

Apicorp's mandate is to assist the development of member states' hydrocarbon sectors through project loans, trade finance and direct equity investments.

According to Moody's, the company's credit strengths include shareholders' strong commitment to the organisation; a high-quality asset portfolio; an established track record; and de facto preferred creditor status.

The credit challenges include a significant balance sheet maturity mismatch; lower-rated shareholders than some other MDBs; and a high degree of asset concentration.

"Although Apicorp's level of capitalisation is relatively strong compared to that of commercial banks, it is not as strong as that of other MDBs that Moody's rates," says Tristan Cooper, Moody's head analyst for Middle East Sovereigns.

In Moody's view, Apicorp's ten shareholder governments appear to be strongly committed to supporting the organisation as indicated by three previous capital increases (in 1981, 1996, and 2003).

In 2008, its shareholders agreed to inject $1 billion of deposits in order to offset some adverse effects from the global financial crisis. So far, $420 million of these deposits have been received, the Moody's stated.

Furthermore, Apicorp shareholders have pledged to support the organisation on a "joint and several" basis, although the wording of the pledge falls short of a full financial guarantee for creditors.

"The performance of Apicorp's assets is unusually robust compared with other MDBs, with a reported weighted average credit quality equivalent to Aa on Moody's rating scale," explained Cooper.

Around half of Apicorp's loan assets are covered by completion guarantees from project sponsors, most of whom are government-owned oil companies, the Moody's statement added.-TradeArabia News Service




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