DIAL raises $289 mn in junk bond sale at 6.12% coupon

Delhi International Airport (DIAL), which operates the nation's largest Indira Gandhi International Airport in the national capital, has raised USD 288.75 million by selling high yielding secured bonds to international investors.

Mumbai: Delhi International Airport (DIAL), which operates the nation's largest Indira Gandhi International Airport in the national capital, has raised USD 288.75 million by selling high yielding secured bonds to international investors.

According to Citi India, which was one of the joint lead managers to the issue, told PTI today that the just-completed bond sale is the first such instrument not only out of the country, but across Asia this year.

The DIAL issue is also the first such instrument from the public-private partnership space in the country.
The 7-year Reg S secured bonds, which has a "stable" rating from major international rating agencies, were priced at 6.125 percent, against initial guidance of 6.5 percent.

While Moody's has rated the issue at Ba1 with stable outlook, S&P has given a BB rating with stable outlook.

It can be recalled that 2014 was the record year not only for high quality bond offerings from the country, but even for the junk bond market with total debt raising touching USD 19 billion from the country.

Out of this, over USD 5.5 billions were raised by companies like like Tata Steel, Tata Motors Rolta and Motherson Sumi among others, selling junk bonds which were colloquially used for a high-yielding or non-investment grade bonds, to international investors. Many of these companies are paying up to 8.8 percent to such instruments.

Junk bonds are generally fixed-income instruments that carry a lower rating and are called so because of their higher default risk in comparison to the investment-grade securities.

The issue got a subscription for more than 17-times the offer amount at USD 5 billion, indicating the demand from the country even for such junk bonds, indicating improvement in the sentiment about Indian debt among international investors, Citi said.

Commenting on the deal, Citi India's debt capital markets origination head Neville Fernandes said, "Refinancing continues to be an important theme in 2015, with DIAL being the first corporate high yield bond to be issued in Asia and India. The strong investor response demonstrates the strength of the company's credit story and the continued interest by global investors in Indian paper."

This transaction is expected to help DIAL reduce interest costs, extend their debt maturities, benefit from operational flexibility and deepen their capital structure and also open up the USD bond market for other marquee infrastructure companies in the country, Fernandes said.

The DIAL bonds were snapped up by investors across Asia (70 percent), Europe, Middle East and Africa (27 percent) and offshore American investors who constituted 3 percent, Citi said.

From account types, the 350 investor accounts constituted 67 percent of investors as fund houses, 17 percent state-owned banks, and 16 percent private banks and corporates. The other arrangers to the issue included HSBC and JP Morgan.

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