Abu Dhabi's Ipic has $20bn in debt

Company's profits jumped 165% in H1 2010, official documents show

International Petroleum Investment Company (Ipic), the Abu Dhabi government’s investment firm, has $20.3 billion in long and short-term debt on its books and its total equity amounts to $14.6 billion, official documents show.

According to a copy of Ipic’s recent bond prospectus seen by Emirates 24|7, the unlisted Ipic, which is therefore not obligated to publish financial information on a regular basis, had $5.34 billion in short-term debt and $14.96 billion in long-term debt as of June 30, 2010.

The debt on Ipic’s books includes borrowings of companies that it owns, including Aabar Investments, Ferrostaal, Borealis and Nova Chemicals. Ipic, which has made a number of significant acquisitions and disposals in recent years (see below), says in the documents that it would continue to “evaluate potential investment opportunities and will make investments if an attractive investment opportunity that meets its investment criteria arises.”

However, it maintains that, having built-up a substantial debt outstanding, it “intends to focus on integrating its recent investments into its existing portfolio in a manner that reduces costs, maximises efficiencies and enhances synergies across its investment portfolio” for the remainder of 2010.

According to the same documents, which include Ipic’s financial statement, its total liabilities amounted to $33.58bn while its assets were worth $48.18bn as of June 30, 2010. The company’s profits jumped two-and-a-half times to Dh1.4bn during the first half of 2010 compared with $527m in the same period of 2009, the statement shows.

Ipic GMTN Ltd, an Ipic subsidiary, is in the process of undertaking a potential roadshow for its benchmark Global Medium Term Note Programme for an as-yet undisclosed sum. A benchmark issue is typically at least $500 million.

Documents seen by this website also reveal that Ipic’s subsidiary Aabar Investments, in which it has an 86.2 per cent stake, “entered into sale and purchase agreements for the sale of its entire 3.3 per cent stake in Atlantia for an aggregate purchase price of €321m” and that “[c]ompletion of the sales is expected shortly.”

Last month, Ipic received a Dh1 billion ($272m) unsecured Islamic Murabaha facility for general corporate and working capital purposes, with a Murabaha profit at a margin over EIBOR, fully repayable on July 13, 2013, documents reveal.

Also in October 2010, Ipic’s arm Aabar completed its acquisition of a 31.8 per cent stake in Virgin Galactic for $280 million.

Ipic’s recent acquisitions and disposals
Key acquisitions and disposals made by Ipic since January 1, 2007:

Year-ended December 31, 2007
• In August 2007, Ipic and OMV restructured their respective 50 per cent stakes in Agrolinz Melamine International Group into Borealis, who became its sole shareholder.
• In September 2007, Ipic acquired a 20.8 per cent stake in Cosmo Oil for ¥89.8 billion ($785m).

Year-ended December 31, 2008
• Ipic acquired a 4.1 per cent interest in EDP through a series of open market purchases of shares totalling €483m ($702m).
• Ipic increased its holding in OMV from 17.6 per cent to 19.6 per cent through purchases of additional shares totalling €167m ($214m).
• In November 2008, the company acquired the Barclays Financial Instruments for £3.3b ($5b).

Year-ended December 31, 2009
• In February and March 2009, the company acquired mandatory exchangeable bonds issued by Aabar for Dh6.7b ($1.8b) that, in each case, it immediately converted resulting in the company acquiring an aggregate 71.2 per cent stake in Aabar, which has been reflected in the group’s results of operations from March 23, 2009.
• In March 2009, the company acquired a 70 per cent stake in Ferrostaal for consideration of €513m ($698m). As part of the acquisition, the company and the previous shareholders of Ferrostaal also entered into a put and call arrangement in respect of the outstanding 30 per cent minority interest.
• In March 2009, the company acquired mandatory exchangeable bonds for A$1.7b ($1.1b), which, upon exchange, on or before 2014, will result in the company acquiring shares in Oil Search, subject to certain circumstances under which the Independent Public Business Corporation may elect to repay the IPBC Bond in cash. The exchangeable bonds are treated as embedded derivatives in the consolidated financial statements.
• In July 2009, the company increased its stake in CEPSA to 47.1 per cent for €3.3b ($4.7b).
• In July 2009, the company completed the acquisition of 100 per cent of Nova Chemicals for a total consideration of $503m. The company also provided a $250m backstop facility, out of which Nova Chemicals utilised $200m that was later converted into equity.
• In December 2009, the company increased its stake in OMV to 20 per cent through the purchase of OMV shares for €37m ($53m), which has been reflected in the Group’s results of operations from December 31, 2009.
• During 2009, the Company disposed of its investments in the Barclays Financial Instruments for total net proceeds of approximately £4.7b ($7b) and realised a net gain of $2.2b.

Six months-ended June 30, 2010
• In January 2010, the company sold its 20 per cent stake in Oman Polypropylene for $20m.
• In June 2010, a shareholder loan provided to Aabar by the company in 2009 was converted into non-interest bearing convertible bonds of Aabar, which, effective June 13, 2010, were converted into 600m shares of Aabar at Dh2.50 per share, increasing the company’s shareholding in Aabar from 71.2 per cent to 75.5 per cent.

Recent Developments
In October 2010, Aabar entered into sale and purchase agreements for the sale of its entire 3.3 per cent stake in Atlantia for an aggregate purchase price of €321m. Completion of the sales is expected shortly subject to closing conditions.
In October 2010, the company received an Dh1b ($272m) unsecured Islamic murabaha facility for general corporate and working capital purposes, with a murabaha profit at a margin over EIBOR, fully repayable on 13 July 2013.
In October 2010, Aabar completed its acquisition of a 31.8 per cent stake in Virgin Galactic for a consideration of $280m.
In September 2010, the company received a $150m unsecured conventional loan for general corporate and working capital purposes, with an interest rate of a margin over LIBOR, fully repayable on September 30, 2013.
In September 2010, Aabar signed a loan agreement for €155m. The loan is unsecured, carries an interest at a margin over EURIBOR and is to be repaid in full in September 2011. The loan was drawn in full in October 2010.
In August 2010, the company purchased 430,941,605 shares of Aabar at Dh1.95 per share from Aabar’s non-controlling shareholders, increasing the company’s interest in Aabar from 75.5 per cent to 86.2 per cent as part of the company’s plan to acquire full control of Aabar.
In August 2010, the Group sold its entire interest in Hyundai Oilbank for net proceeds of approximately KRW2,314b ($1,950m) to Hyundai Heavy Industries pursuant to an arbitration award issued in November 2009 according to which the Group was directed to sell its entire interest in Hyundai Oilbank.
In July 2010, Aabar completed the loan syndication of the remaining $600m from the $2b facility.
In July 2010, Aabar invested $54m into two global investment funds: Blue Orchard Private Equity Funds SCA and Oasis Fund SCA.


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