Firms queue up to raise $4 bn from overseas bond market

Financial Express
March 07, 2018

With credit spreads continuing to remain compressed, capex needs and acquisitions fuelling fund requirements and likelihood of overseas borrowing costs going north, at least ten Indian firms are currently exploring the possibilities of tapping the overseas bond market to collectively raise over $4 billion, investment bankers aware of the matter told FE.
One of the companies in the list, IL&FS Transportation Networks (ITNL), had commenced pricing of its dollar bonds on Tuesday. According to latest information available till the time of going to press, it was not yet clear whether the pricing would be completed. “The markets have been choppy,” said a banker close to the deal. The initial price target was 7%.
Investment bankers point out that credit spreads are still attractive and long tenor money is easily available in the dollar bond market. “This is a time when there are expectations that US Treasury yields might go up further. Of the four expected hikes in the Fed funds rate, may be about two have been priced-in in the Treasury yields. If the hikes continue throughout the year, yields will definitely take a hit. Under these circumstances, it is only prudent for a firm to properly time their fund-raising, especially considering the fact that credit spreads are still narrow even for a long-tenor paper,” said a banker.
A rise in the US Treasury yield translates into a higher borrowing cost for dollar bond issuers, unless the spreads see a significant compression. US Fed chief Jerome Powell testified before the House Financial Committee last week, hinting there could be four rate hikes this year instead of three. The Fed chief stated his “personal outlook for the economy has strengthened since December”.
JSW Steel is seen to be among those exploring opportunities to tap the dollar bond market to raise close to a billion dollars via long-tenor paper, said sources. A spokesperson for the company said they have no comments to offer on market speculation. Moody’s Investors Service upgraded JSW Steel Limited’s corporate family rating (CFR) and senior unsecured bond rating to Ba2 from Ba3. “The ratings outlook is stable,” it said in a release.
Rural Electrification Corporation (REC), NTPC and Axis Bank are already believed to have mandated bankers for their respective dollar bond issues. Even firms that are likely to be first time issuers in the dollar bond market are believed to be queing up to explore opportunities given the current market conditions.
Birla Carbon, a manufacturer and supplier of carbon black additives, is believed to be in talks for a dollar bond issuance. The company provides a portfolio of products across ASTM grades and specialty blacks to meet the specific end requirements across rubber, plastics, coatings, inks and niche industries globally.
Mytrah Energy, a sustainable energy firm, and Haldia Petrochemicals, a naptha-based petrochemicals producer, are also believed to be in talks with investment bankers for issuances.

In the airports sector, Mumbai International Airport Limited (MIAL) is believed to be in talks with investment bankers to tap the dollar bond market. A GVK spokesperson said, “As a corporate policy, we do not comment on any speculative queries from the media.”

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