Mumbai: The state-run IDBI Bank has successfully raised USD 500 million through a five-year bond sale in the international markets at a coupon of 3.75 percent which is likely to be the cheapest ever for the bank.
"The final pricing for the USD 500-million international debt issue from IDBI Bank got tightened by 15 basis points to 300 bps over the US treasury bills. The issue marks the first long five-year tenor issuance by the bank," Managing Director and Head of Debt Capital Markets at Standard Chartered Bank South Asia Jujhar Singh said on Wednesday.
StanChart was the lead arranger to the issue.
The money was raised by IDBI's Dubai International Financial Centre branch yesterday and received an over-subscription of USD 2.25 billion from 190 accounts from Asian and European investors, Singh said, adding the bonds will be listed on the Singapore Exchange.
The bank managment could not be contacted immediately for comments.
On the rationale for five-year, 10 months tenor, Singh said the issue will help IDBI spread its debt distribution profile and meet its pricing targets, which helped it achieve a final pricing -3.5 bps tighter than secondary trading levels of its USD bonds maturing in 2018.
"These bonds maturing in January 2019 are the longest tenor bonds issued by IDBI in the USD bond market, achieving the lowest-ever coupon and tightest-ever pricing for IDBI Bank for a five-year tenor," Singh said.
On the large oversubscription and tight pricing despite the challenging market conditions due to the Cyprus issue and political uncertainty in the country due to the key ruling ally pulling out of the government yesterday, Singh said the bank could price the issue very tight by choosing an innovative tenor of five years and 10 months and opting to announce the issue on a day which saw no competing supply from Asia ex-Japan.
The other book-runner to the issue was HSBC. On the geographical split of the allocation, Singh said, as many as 63 percent of investors came in from Asia, with the rest coming in from Europe.
As much as 45 percent of overall investors were banks, 30 percent fund managers and 25 percent private banking clients.
The senior unsecured Reg S bonds carry BBB- rating from both S&P and are part of the bank's USD3.5 billion medium term note programme.
The issue has a settlement date of March 25 and coupon dates of July 25, 2013 and January 25, 2019 which also is the maturity date.
It has a re-offer yield of 3.792 percent with the spread being US Treasury plus 300 bps (3 percent) apart from having a 100 percent put option if aggregate of direct and indirect government shareholding falls below 51 percent, Singh said.
It can be noted that more and more domestic companies, including banks and financial institutions are tapping overseas markets to raise funds.
So far in 2013, over half a dozen companies -- RIL, PowerGrid, Tata Com, ICICI Bank, HDFC Bank, Exim Bank, and Bharti Airtel among others -- raised USD 4.25 billion from overseas debt market.