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PADICO HOLDING Issues the Largest Corporate Bonds At a Value of USD120 Million
PADICO HOLDING Issues the Largest Corporate Bonds At a Value of USD120 Million

Masri: Issuance of bonds is an essential step to strengthen PADICO HOLDING’s current projects, and move forward within the process of sustainable development.

Hulileh: Large demand for the Bonds reflects the trust in PADICO HOLDING within the Palestinian market.

Nabulsi: The success that accompanied PADICO HOLDING’s experience in issuance of bonds is a success for the Securities Sector in Palestine.

Ramallah: 10/8/2016: PADICO HOLDING issued corporate bonds at a value of one hundred and twenty million dollars. The entire amount of the issuance was covered with participation by twelve banks and financial institutions in Palestine and abroad, within the largest issuance of bonds in the Palestinian territories since the establishment of the Palestinian National Authority.

The Bondholders’ Assembly held its first meeting in the presence of Mr. Munib Rasheed Masri, Chairman of Board of Directors, Mr. Buraq Nablusi, CEO of Palestine Capital Market Authority, and Mr. Samir Hulileh, CEO of PADICO HOLDING, in addition to representatives of banks and financial institutions, contributors to the bonds and the Custodian. The Bondholders’ Assembly appointed the Arab Group Company as trustee, and the issuance date was set on Monday 15/8/2016.

Mr. Munib Masri, PADICO HOLDING’s Chairman of the Board of Directors, stated that the issuance of these bonds is an essential step to support the existing projects implemented by PADICO HOLDING. This process shall have a vibrant impact by serving the Palestinian economy and moving forward in the process of sustainable economic development led by PADICO HOLDING for more than two decades.

Mr. Masri added that PADICO HOLDING is progressing in the implementation of its investment plans and development projects, which are one of the pillars of the Palestinian economy, in which they accommodate all vital economic fields, and contribute through employing labor and reducing unemployment in Palestine. In addition, these projects provide welfare and prosperity to the society, as well as acting as strategic projects that aim to support the infrastructure of the Palestinian economy, so that it will become an economy worthy of our vigorous Palestinian State. Mr. Masri explained that this national and developmental goal requires the unification of collective efforts and more coordination, partnership, and integration between the public and private sectors and the civil society institutions, in order to attract capital from inside the country and abroad to support long-term projects that advance a strong Palestinian national economy.

Mr. Masri explained that the issuance complements the first issuance by PADICO HOLDING five years ago, in September 2011, which achieved great success. The company initiated the issuance of the first corporate bonds in Palestine, at a nominal value of USD 85 million. Mr. Masri commended this experience, which was a great success for PADICO HOLDING, and all related entities including governmental institutions, banks and financial institutions in the Palestinian market, led by the managers of the issuance, the Custodian, trustee, Capital Market Authority, and the Ministry of National Economy. This allowed other issuances by public shareholding companies as witnessed later within the Palestinian market.

Mr. Samir Hulileh, CEO of PADICO HOLDING, stated that the issuance of corporate bonds by PADICO HOLDING is due to the fact that bonds are one of the best tools compatible to the nature of the company’s investments, which are medium to long-term development projects, and exceeds a short period to operate and achieve financial returns.

Mr. Hulileh indicated that the “current issuance indicates the great trust that PADICO HOLDING has within the Palestinian market”, explaining that “the issuance process received great demand since the beginning of the year by most of the banks operating in Palestine. The following participated in the issuance: Arab Bank, Bank of Jordan, Cairo Amman Bank, Jordan Kuwait Bank, The National Bank, Palestine Investment Bank, and Capital Bank of Jordan, Al Osool Al Arabia Company, Jordan Ahli Bank, al-Quds Bank, Jordan Commercial Bank, and the Palestine Monetary Authority. The entire nominal value of bonds in the amount of USD 120 million was covered. Most of the banks that participated in the first issuance in 2011 renewed their contribution in the current second issuance. In fact, several of them contributed with amounts greater than the first issuance, which reflects the bond holders’ satisfaction during the past five years, and indicates the trust and transparent relationship between the issuing company (PADICO HOLDING), trustee, the Custodian, and Bond Holders”.

Mr. Hulileh noted that for PADICO HOLDING to repeat this essential experience through the cooperation of all entities that supported its success will leave an important and positive impact on the economy in Palestine, particularly on the financial and business sectors. This will also contribute to preparing the compatible conditions to introduce new financial tools to the Palestinian public and private sectors, which coincides with the development of the legal environment that allows the entry of such tools.

Regarding the action plan for the next phase, Mr. Hulileh stated that the company is “moving forward in advancing the development projects it launched in the past years, most importantly Jericho Gate for Real Estate Investment Project, which is a large project that requires relatively large financing and a long period of implementation that extends to ten years. In addition to other projects, such as Nakheel Palestine for Agricultural Investment, in which more than USD 15 million were invested, it is expected to achieve the break-even point in 2018. In addition to the Power Generation Project in the Northern West Bank, a project at a cost of USD 620 million, in which PADICO HOLDING holds a share of 20%, as well as Rabiyat al-Quds Project in the Sharafat area in Jerusalem, and several other investment projects”.

Mr. Hulileh confirmed that PADICO HOLDING seeks to complete these projects in order to achieve appropriate income in the short and long-terms. He indicated that the proceeds of the current issuance at the amount of USD 120 million will be used for the repayment of existing bonds that were issued in 2011, at an amount of USD 85 million. He noted that the proceeds at the time were used primarily in the long-term projects for development that need additional time to provide appropriate cash income. Mr. Hulileh indicated that the additional proceeds will be used to repay short-term bank loans, which were injected into development projects over the past years. Additionally, USD 21 million will be used in new investment activities in the upcoming period, including the completion of projects under development and the provision of needed support to reach a state of stability and maturity to begin generating return or cash income in the medium-term.

Mr. Amjad Hassoun, PADICO HOLDING’s Chief Financial Officer, stated that “as an issuing company, PADICO HOLDING fulfilled all its obligations towards bondholders in the first issuance, trustee, and the Custodian, in which the interest was paid on time without any delay during the past five years. The company also enhanced the collateral when requested by the trustee. In addition, the Bondholders held annual meetings to discuss all matters related to bonds, the performance and the financial position of the issuing company”.

 

Mr. Hassoun added that “the second issuance holds a similar description to the first one, in terms of coverage, collateral, and other provision. The bonds are collateralized with stocks and are considered as a senior debt in which the value of these stocks covers a ratio of 130% of the total nominal value of the bonds; these include the stocks in the Palestine Telecommunications Company, Palestine Real Estate Investment Company, and Palestine Industrial Investment Company.

 

Mr. Hassoun indicated that “the new bonds are subject to a fixed interest rate of 5% for the first thirty six months, and a variable interest rate equal to (3%), with a floor of 5% for the remaining twenty-four months of the bonds’ life, and that the interest is to be paid on a semi-annual basis.

 

Mr. Hassoun indicated that the new bonds, similar to the previous ones are collateral. The issuer company has the right to amortize a nominal value of USD 1,000,000, and its multipliers from the issued bonds with a ceiling up to the full amount of the bonds’ nominal value, at every maturity date of interest that follows the first semi-annual interest maturity date at a predetermined price stated in the prospectus.

 

Capital Market Authority’s Assessment of PADICO HOLDING’s experience in Issuing Bonds

Mr. Buraq Nablulsi, CEO of the Capital Market Authority, stated that PADICO HOLDING complied with all the requirements and conditions for issuing bonds, particularly the Securities Law No. (12) of 2001, and the instructions issued by the Authority’s Board of Directors, including the development of a bonds prospectus that includes all the needed information and data that enables the public and investors, particularly bondholders, to make investment decisions to contribute to the bonds. The most important data and information includes: the number and types of bonds offered for contribution, price of bond issuance, and the interest incurred on these bonds. He indicated that this bonds prospectus includes the collateral and funds provided by the company for bondholders on how to use the proceeds of this issuance of the bonds.

Mr. Nablusi added that the company contracted a Custodian , which is the entity entrusted with supplying the accrued interest on bonds per the identified schedule in the bonds prospectus for the benefit of bondholders. In addition, the company assigned a trustee according to the instructions issued by the Authority for the registration of a Secretary of Issuance, in order to provide full support for the benefit of bondholders and ensure that the issuer (the company) is committed to all its obligations set forth in the issuance prospectus. The trustee is also responsible for the calculation of assets’ adequacy to repay the bondholders, and to regulate meetings for bondholders according to the provisions of the law. Mr. Nablulsi added, “Accordingly, the company is committed to all terms and provisions issued by Palestine Capital Market Authority and received the approval to issue the bonds”.

Mr. Nabulsi added that “there is no doubt that the success of PADICO HOLDING’s experience in issuing bonds greatly contributed to other companies’ serious consideration of utilizing this experience to provide a source of financing to their operations, particularly the companies that have long-term activities and operations”. In this context, Mr. Nablusi indicated that the Arab Palestinian Investment Company (APIC) issued financing bonds earlier in 2012 and the Palestine Commercial Bank in 2014.

Mr. Nabulsi also added, “PADICO HOLDING’s success in issuing bonds the first time, and the lack of obstacles in that issuance constitutes a success of the Securities Sector in Palestine”. He indicated that all governing entities for issuance fulfilled their required roles according to the regulatory conditions and requirements, which primarily contributed to the successes of PADICO HOLDING’s experience and to the issuance of bonds for the second time. Mr. Nabulsi noted that we can identify the success of the first experience through the significant increase in the value of the offered bonds within the second issue, which amounts to USD120 million compared with the first issue at the amount of USD85 million.

Mr. Nablusi concluded by stating that the “Palestine Capital Market Authority considers the success of PADICO HOLDING in issuing bonds as an important and positive step in the development of the Securities Sector as well as providing a new financial tool in the Palestine Exchange, in addition to stocks. Accordingly, the Authority encourages the issuance of bonds, particularly for large companies with good financial standing, to finance their vital projects at a lower cost”. Mr. Nablulsi explained that the “bonds greatly contribute to investing in frozen liquidity in the real estate sector within the Palestine Exchange, and it is an additional mechanism to employ untapped savings”. He added that the “issuance of bonds under the regulated Exchange , rules and regulations for those dealing in the bonds market has a great significance and is a good opportunity for small investors who are looking for a stable income away from risks and fluctuations in the prices of stocks.

Mr. Hulileh commended the sincere efforts and persistence of all parties over the past few months for the preparations to issue these bonds, particularly the efforts of financial and legal advisers, in addition to the collaborating efforts by colleagues in the Palestine Capital Market Authority and the Ministry of National Economy.