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IPIC Said to Raise $2.9 Billion in Biggest Arab Company Bond

International Petroleum Investment Co. plans to raise about $2.9 billion in bonds, the biggest Arab corporate debt sale this year, as the Abu Dhabi state-owned investor considers financing for energy projects.

The company, known as IPIC, plans to sell $750 million in three-year bonds and two-part 1.65 billion euro-denominated ($2.14 billion) debt maturing in 5.5 years and 10.5 years, according to six people familiar with the transaction. The size of the sale surpasses Qatar National Bank’s total offerings of about $2 billion this year, data compiled by Bloomberg show.

“We’ve seen how high the appetite is for Abu Dhabi paper this year and the hunger for yields, and that there’s a lot of liquidity in the market,” Haissam Arabi, chief executive officer of Dubai-based hedge fund Gulfmena Investments Ltd., said by telephone today.

IPIC, which raised $3.75 billion from bond sales in October last year, is considering financing options for refinery and liquefied natural gas projects that include non-recourse project financing. It has $17.3 billion of debt outstanding and $4 billion of loans due next year, and is rated Aa3 by Moody’s Investors Service, the fourth-highest investment grade.

Yields Tumble

Borrowing costs of companies in the six-nation Gulf Cooperation Council have tumbled this year as the economies expanded and state-linked entities in Dubai restructured and paid debts. The yield on IPIC’s 5.5 percent dollar bonds due March 2022 tumbled 190 basis points, or 1.90 percentage points, this year to 3.58 percent today, after touching a record 3.44 percent Oct. 19, according to data compiled by Bloomberg.

The average yield on GCC company bonds dropped 169 basis points to a record 3.53 percent on Nov. 13, before trading at 3.6 percent yesterday, HSBC/Nasdaq Dubai’s GCC Conventional Corporate U.S. Dollar Bond Index shows.

“IPIC is one of the most stable and fast growing energy companies in the region,” said Hakim Azaiez, the London-based head of investment at GCA Asset Management, adding that he bid for IPIC’s securities. “The company has a clear strategy and a solid management.”

IPIC’s refinery project in Fujairah, one of seven sheikhdoms in the United Arab Emirates, is expected to have capital expenditure of about $3.5 billion, the company said in the bonds prospectus. The company is also building a refinery at the port of Duqm in Oman, splitting the $6 billion cost evenly with Oman Oil Co., according to the prospectus.

Pricing Range

IPIC may price the three-year dollar-denominated bonds in the range of 135 basis points to 140 basis points above the benchmark midswap range, according to the people, who declined to be identified because the details are private. The 5.5-year euro-denominated notes may be priced in the range of 145 basis points to 150 basis points above the benchmark rate, while the 10.5-year euro securities may be priced at 195 basis points to 200 basis points above midswaps, the people said.

BNP Paribas SA, JPMorgan Chase & Co., National Bank of Abu Dhabi PJSC, Natixis SA, Royal Bank of Scotland Group Plc, and UniCredit SpA are arranging the sale, the people said.

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