x Abu Dhabi, UAEFriday 28 July 2017

Abu Dhabi's Ipic uses bond funding to expand European oil refining network

Ipic raises the equivalent of US$4.4bn in the Mena region's first euro and sterling multi-tranche bond issue.

A Cepsa refinery and petro-chemical compound is illuminated at night, in San Roque, Spain, on Thursday, Nov. 26, 2009. Spain has a shortage of fuels and must invest in refineries to reduce dependence on imports, according to Cia Espanola de Petroleos SA, the country's second-largest oil company. Photographer: Xabier Mikel Laburu/Bloomberg
A Cepsa refinery and petro-chemical compound is illuminated at night, in San Roque, Spain, on Thursday, Nov. 26, 2009. Spain has a shortage of fuels and must invest in refineries to reduce dependence on imports, according to Cia Espanola de Petroleos SA, the country's second-largest oil company. Photographer: Xabier Mikel Laburu/Bloomberg

International Petroleum Investment Company(Ipic), the Abu Dhabi Government's strategic energy investment enterprise, has raised the equivalent of US$4.4 billion (Dh16.16bn) from a bond sale to buy Spain's Compania Espanola de Petroleos (Cepsa).

The Mena region's first euro and sterling-denominated multi-tranche bond issue will help to expand Ipic's European oil refining and petrochemicals network.

The conclusion of the two-tiered offering suggested there was still a healthy international appetite for debt backed by the Abu Dhabi Government.

Ipic said the offering was the first Mena benchmark sterling deal since February 2007, and the region's first euro-denominated corporate transaction since November 2008,

"The strong interest in Ipic's debut euro and sterling issuance clearly demonstrates the confidence and trust of the international capital markets in Abu Dhabi, the Government, and the credit qualities and strategic mandate of Ipic," said Khadem al Qubaisi, the managing director of the company.

The issue was "extremely well received globally" and generated more than $12bn on orders from 350 investors, about half of whom were making their first investment in Ipic bonds, the company said.

Ipic's €1.25bn (Dh6.43bn) of five-year notes were priced last week to yield 5.032 per cent, 108 basis points higher than its existing dollar-denominated five-year bonds that mature a year earlier.

The euro-denominated five-year notes have a coupon of 4.875 per cent, compared with a 5.875 per cent coupon for a second €1.25bn tranche of 10-year notes and a 6.875 per cent coupon for the £550 million (Dh3.25bn) instalment of 15-year bonds.

"It's a strange time to go to the markets, in part because the Middle East is in crisis," Jim McCormick, the London-based head of fixed-income research for Europe, the Middle East and Africa at Nomura Holdings, told Bloomberg News. "What it tells you … is simply that it is going to be a more difficult time for Middle East issuers until we have some clarification on what's happening."

The government of Bahrain yesterday sought to quell political protests, with the help of Saudi Arabia, and the UAE. Government attacks on rebel militias and civilian protesters continued in Libya and Yemen.

"There's a lot of uncertainty in the region in general, so the company has to pay up for that," Juan Esteban Valencia, a credit strategist at Societe Generale in London, said last week.

Ipic agreed last month to acquire the 53 per cent of Cepsa that it did not already own for about €4bn. Ipic is best known for its overseas investments in the oil refining and chemicals sectors.

In the UAE, Ipic is commissioning a strategic oil pipeline capable of delivering more than half of Abu Dhabi's daily crude oil output to the port of Fujairah. The pipeline bypasses the Strait of Hormuz.

tcarlisle@thenational.ae