Moody’s upgrades Apicorp rating on strong liquidity

14 October, 2019 12:00 AM printer

RIYADH: Moody’s Investors Service upgraded long-term ratings for Arab Petroleum Investments Corporation (Apicorp), a multilateral lender owned by the 10 members of the Organisation of Arab Petroleum Exporting Countries, but revised down its outlook as challenges rise for the energy sector-focused lender in most of its markets.

Apicorp’s long-term issuer and senior unsecured rating was upgraded to Aa2 from Aa3, both high quality and very low credit risk rating categories. Its short-term issuer rating was affirmed at Prime-1, the highest level, indicating its ability to repay short-term debt, report agencies.

A “steady improvement” that the corporation has made “in its liquidity and funding profile by diversifying its funding sources”, is among the key drivers of the rating upgrade, Moody’s said.

This has allowed Apicorp to “significantly reduce its reliance of short-term wholesale deposits and eliminate short-term asset-liability mismatches”, the rating agency said.

Apicorp saw profit to its shareholders drop 53 per cent year-on-year to $70.3 million (Dh258.2m) in the first half of 2019, mainly due to a one-off gain of Dh86.7m in the first half of 2018 on the sale of its stake in National Petroleum Services.

At the same time, the lender’s interest income grew 36 per cent to $146.1m and chief executive Ahmed Ali Attiga said the corporation completed six medium-term funding transactions worth $1.4 billion from international markets. Apicorp attributed the growth in recurring income to its corporate finance and treasury business lines, which grew 44 per cent and 78 per cent, respectively.

Moody’s had revised Apicorp’s outlook upwards from stable to positive in October, but has now reverted it to stable, mainly due to “the challenging operating environment in a number of countries where Apicorp operates, stemming mostly from the regional geopolitical tensions and the pressures posed by the moderate oil price environment”, the report said.

Oil markets have fluctuated this year on the back a softening global economy and concerns about waning demand.