Apicorp plans to borrow $533m

05 December 2011

Regional government-owned bank taps Saudi lenders for funding

Saudi Arabia’s Arab Petroleum Investments Corporation (Apicorp) is planning to raise about SR2bn ($533m) from local banks early in 2012, according to sources close to the company.

Apicorp has already begun holding talks with banks about the deal, which will have a tenor of about three years. A group of about four or five Saudi banks are expected to form a club to fund the loan, which will be used to fund Apicorp’s ongoing lending activities.

Banks are in the process of obtaining internal credit approvals before giving their loan commitments to Apicorp. Although the size of the deal is currently about SR2bn, sources in the kingdom say its size could still be increased.

Bankers in Saudi Arabia say a combination of political instability in the Arab region and huge volumes of liquidity in the local banks means Apicorp decided to raise money in the local markets, rather than internationally. “Apicorp had been looking at international markets to raise money, but that has become more difficult recently. With so much local liquidity, they should get a good deal from local banks,” says one banker close to the deal.

In October 2010, Apicorp, a multilateral development bank, raised SR2bn from a sukuk (Islamic bond) issued to Saudi investors. The deal was oversubscribed with an order book of SR6bn, and was priced at 110 basis points above the Saudi interbank offered rate (Sibor). That deal had a tenor of five years.

Apicorp, with shareholders that include the governments of Saudi Arabia, the UAE and Kuwait, could not be reached to comment on the deal.

The bank’s decision to approach local lenders rather than international markets is the latest sign that the cheap riyal-denominated loans offered by local banks are putting borrowers off using more expensive dollar loans from foreign sources.

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