Mubasher: Moody's Investors Service has on Friday assigned a provisional senior unsecured debt rating of (P) Aa3 to the Arab Petroleum Investments Corporation's (APICORP) proposed USD-denominated Floating Rate Notes to be listed at Taipei Exchange.
Moody's expects to assign a definitive rating to the notes upon closing of the issuance and review of the terms of the final transaction documents, according to a report issued today.
According to the preliminary prospectus, the notes are direct, unconditional and unsecured obligations of APICORP, and rank and will rank pari passu with all other outstanding unsecured and unsubordinated obligations of APICORP.
Therefore, the (P) Aa3 senior unsecured debt rating mirrors APICORP's long-term issuer rating of Aa3 with stable outlook, the report indicated.
APICORP's issuer rating reflects high levels of capital adequacy and liquidity, and very strong member support.
Capital adequacy is supported by a strong capital position, moderate leverage, and manageable nonperforming assets, while the slump in oil prices since 2014 has only mildly weighed on the Corporation's profitability.
APICORP's strong liquidity position is informed by fairly low funding costs and a very strong debt service coverage ratio.
Its highest-rated members are Saudi Arabia (A1 stable), which holds a 17% share, as well as the United Arab Emirates (Aa2 stable), Kuwait (Aa2 stable) and Qatar (Aa3 negative) which own a combined 44% of the Corporation.
The main credit challenges facing APICORP are a still relatively high reliance on wholesale deposits for funding and a somewhat weaker liquidity position relative to peers as reflected in prevailing maturity mismatch.
The high degree of country and sector concentration in a challenging geopolitical environment poses another potential credit challenge, and APICORP is also exposed to potential pressures on its shareholders’ credit profiles, which could negatively affect their ability to provide extraordinary support, particularly in an environment of oil prices staying lower for longer or in case of a renewed oil price shock, the report concluded.
