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Abu Dhabi, UAEFriday 19 October 2018

Mubadala seeks to shift $8.8bn of debt in internal restructure

The transfer of debt and assets does not have an impact on Mubadala's ratings

Abu Dhabi’s government-controlled oil and gas investor International Petroleum Investment Company (Ipic) is looking to shift $8.8 billion (Dh33.2bn) of debt to Mubadala Development Company (MDC) after it merged with the state-run investment firm last year.

Ipic on Monday sent a request to the company’s bondholders and other creditors to transfer its public and private debt liabilities -- $6.9bn in bonds and $1.9bn in private debt -- to MDC's balance sheet. The company has asked the creditors to agree to MDC becoming the guarantor of the debt.

Ipic will also subsequently shift assets worth $25.7bn to MDC as it transfers both Ipic and MDC’s debt under one public investment vehicle.

“The end result will be a more efficient single rated entity within the [Mubadala] group responsible for our capital market funding activities,” Mubadala Investment Company said in a statement to The National on Tuesday.

The Ipic request was sent to creditors including fixed income investors holding $1.5bn of the company's bonds due in 2020, €1.25bn ($1.45bn) due in 2021, $1.5bn due in 2022, €850 million due in 2023, £550m ($716.82m) maturing in 2026 and $750m paper maturing in 2041.

BNP Paribas, Citi, Deutsche Bank, First Abu Dhabi Bank, and Merrill Lynch International are working on the proposed deal, Mubadala said.

Ipic and MDC merged to form a more efficient investment vehicle, which was later renamed Mubadala Investment Company. The new Abu Dhabi firm is part of the government's drive to create larger and more efficient financial entities amid a tougher global economic environment.

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Mubadala, which invests globally across 15 sectors, is central to Abu Dhabi’s efforts to diversify its economy away from oil. It has an asset base of $225bn, which includes consolidated holdings of Abu Dhabi Investment Council, which merged with Mubadala in March this year.

Mubadala has actively pursued investments in Europe and Asia, with a focus on China, the world’s second-biggest economy, to further strengthen its international portfolio.

"The transfer of debt and assets does not have an impact on Mubadala's ratings because its ratings, as do the ratings of Ipic, already incorporate assumptions of very high levels of support from the government of Abu Dhabi”, Moody’s Investors Service said in a note.

“Moody's does not see any reasons for changing these assumptions. Mubadala's liquidity profile will be strengthened given the maturity of Ipic's investments that have been free cash flow positive over the past 5 years.”

The rating agency said that the outlook of Mubadala is aligned with that of the government of Abu Dhabi as Mubadala remains “intrinsically linked” to it.

Mubadala on Monday said that to reach their conclusions, the global rating agencies, have assessed the administrative steps the company is taking to “optimise and simplify our group holding structure”.

Last month the company reported a total comprehensive income of Dh10.6bn for the first half of the year, driven by strong public equities performance and higher income from its petroleum and petrochemicals businesses.