HOLDING Issues the Largest Corporate Bonds
the 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 to the Bonds,
which 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 in the 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 Palestinian territories since the of the Palestinian
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 Arab Group Company as trustee, and the issuance
date was set on Monday 15/8/2016.
Mr. Munib Masri, PADICO HOLDING’s
Chairman of 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 in serving the Palestinian economy and
in 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 in employing
labor and reduce 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, to become an
economy worthy to our robust 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, with a nominal value of
USD85 million. Mr. Masri commended this experience, which was a great success
to PADICO HOLDING, and all related entities of 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 Palestine Monetary
Authority. The entire nominal value of bonds in the amount of USD120 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 important and positive impact on
the economy in Palestine, particularly on the financial and business sectors.
This will also contribute in 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 USD15 million were invested in this project, and is
expected to achieve the break-even point in 2018. In addition to the Power
Generation Project in Northern West Bank, a project with a cost of USD620
million, in which PADICO HOLDING holds a share of 20%, as well as Rabiyat AlQuds
Project in 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
with the amount of USD120 million will be used in the repayment of existing bonds
that were issued in 2011, with an amount of USD85 million. He noted that the proceeds
at the time were used primarily in the long-term projects under development
that needs 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 for development projects over the past years. Additionally,
USD21 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 the stability and maturity state to begin generating
return or cash income in the medium-term.
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, and the performance and
the financial position of the issuing company”.
Hassoun added that “the second issuance holds 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 Palestine Telecommunications Company, Palestine Real
Estate Investment Company, and Palestine Industrial Investment Company.
Hassoun indicated that “the new bonds are subject to fixed interest rate of 5%
for the first thirty six months, and a variable interest rate equal to (USD 6- Months
LIBOR+ 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.
Hassoun indicated that the new bonds, similar to the previous one 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 to PADICO HOLDING’s
experience in Issuing Bonds
Mr. Buraq Nablulsi, CEO of
Capital Market Authority, stated that PADICO HOLDING complied with all the
requirements and conditions for issuing bonds, particularly Securities Law No.
(12) of 2001, and the instructions issued by the Authority’s Board of
Directors, including the development of 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. Most
important data and information includes: 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
Mr. Nablusi added that the
company contracted a Custodian , which is the entity entrusted for 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 in other companies to seriously consider in 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 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 is a successes to the Securities Sector in Palestine”. He
indicated that all governing entities to issuance fulfilled the required roles
according to the regulatory conditions and requirements, which primarily
contributed to the successes of PADICO HOLDING’s experience and for 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 with the amount of USD85 million.
Mr. Nablusi concluded by stating
that “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 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 with a lower cost”. Mr. Nablulsi
explained that the “bonds greatly contribute to investing in frozen liquidity
in the real estate sector within Palestine Exchange, and it
is and an additional mechanism to employ the untapped savings”. He added that the
“issuance of bonds under the regulated Exchange and 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 the colleagues in
Palestine Capital Market Authority and the Ministry of National Economy.