Exim Bank sells $750 mn bonds at 4%

Exim Bank sells $750 mn bonds at 4% Mumbai: Exim Bank on Tuesday set yet another benchmark in raising cheap debt from overseas investors by selling USD 750 million worth bonds through a European debt sale programme that was overbought by 8.5 times and at a coupon of 4 percent.

"The 10-year issue, the first from Exim Bank, has been a rocking success as it has been timed well. The pricing at 4.119 percent is the cheapest ever we have raised and is cheaper than the previous two 5-year issues this fiscal, as the India story got a major leg-up in the recent past from the finance ministry," Exim Bank Chairman and Managing Director T C A Ranganathan said on Tuesday.

Explaining the timing as the reason for cheap pricing, he said global liquidity improved since the resolution of the US fiscal cliff. Coupled with this, the bank got the benefit of being the first issuer from India in 2013.

Since traders were holidaying till last weekend, they lapped up the issue.

Ranganathan said there has been so much demand that the bank had to increase the issue size from the initial USD 500 million to USD 750 million, making it a benchmark issue.

The issue was oversubscribed 8.5 times, he said, adding this is part of the bank's European medium term note of USD 6 billion, of which it has raised USD 1.5 billion in FY13.

Asked about the rationale for a 10-year money (Exim Bank had in July raised USD 500 million five-year money end July and another USD 250 million in September), Ranganathan said, "I have lots of 10-year commitments. So, I have to keep long-term money. Also, 10-year issues get better pricing."

More than half of the money raised has been committed to a clutch of foreign governments and Indian firms, he said.

On the successful completion of the bond sale, Citi India, the book-runner to the issue along with StanChart, said: "The price tightening of 40 bps from initial guidance (of 260 bps) to final pricing, is primarily attributed to Exim Bank's strong credit and lineage, track record, remarkable market momentum and the highest quality order book.

"The notes are rated Baa3 by Moody's and BBB- by S&P," Citi India head of capital markets origination Rajiv Nayar said.

On the huge success of the issue, Nayar said, "Exim Bank's inaugural 10-year US dollar bond exceeded all expectations and priced inside their existing USD notes due 2017, representing a negative new issue concession.

"The 10-year tenor helped investors add duration to their portfolio which greatly contributed to the strength of the order book with participation from over 260 investors and the fine pricing reflects the level of investors' confidence in Exim Bank's credit, which also marks the first US dollar bond sale from the country this year."

StanChart India managing director for capital markets Jujhar Singh said the record low coupon of 4 percent achieved for this issue, pierced the secondary level of Exim's own bonds maturing in 2017, and should help establish a new tight benchmark for other Indian issuers.

"The bonds have tightened in the secondary market by 5 bps and should result in further tightening of other outstanding Indian bonds (for NTPC, SBI, ICICI, and others) and should benefit other issuers who consider issuing USD bonds in the coming weeks," Singh said.

This was the first European MTN (E-MTN) issue from the Exim Bank and is a dollar-denominated senior unsecured notes, Ranganathan said.

In an E-MTN programme, American investors cannot participate, while offshore US funds can take part.
The Exim Bank had also done global MTN or G-MTN issues in the past.

On the investor profile, the Citi official said at 76 percent, Asian investors were the large majority, followed by 22 percent from Europe, and the remaining two percent being offshore US investors.

PTI