The nation’s largest lender State Bank of India (SBI) has hit the international debt market with a benchmark issue to raise around $500 million as part of its $10-billion medium-term notes programme through a five-year dollar money sale.
“The SBI is in the international debt market with a benchmark issue to raise around $500 million in US dollar-denominated bonds. The money will be raised through its London branch and will be listed on the Singapore Exchange,” said two investment banking sources.
When contacted, SBI refused to comment, citing confidentiality clause as the market moving nature of the information.
All the three international rating agencies have accorded investment grade ratings to the proposed $500-million bond sale by SBI, which has been away from the overseas debt market for some time now.
SBI last raised overseas debt by issuing dollar-denominated notes worth $300 million last September and prior to that in February 2014, it had raised $1.25 billion in another dollar money sale.
The bank has so far raised $3.5 billion out of its $10 billion medium-term note (MTN) programme, including $400 million in perpetual bonds. The bank had also concluded AT1 Basel III-compliant non-convertible, perpetual non-call five-year subordinated, unsecured notes at a coupon 5.5 per cent payable semi-annually under $10 billion Reg S bond programme.
Moody’s has assigned a ‘Baa3’ rating to the senior unsecured notes, issued under its $10-billion MTN programme.
Fitch has also assigned ‘BBB-’ ratings to the programme that constitutes direct, unconditional, unsubordinated and unsecured obligations of the issuer. “The issue will at all times rank pari passu among themselves and with all other unsubordinated and unsecured obligations of State Bank,” Fitch said, adding the tenor of the issue is expected to be around five years.
S&P too assigned ‘BBB-’ long-term issue rating in line with the sovereign rating, to the proposed issue of SBI’s senior unsecured notes.
The rating on the notes reflects the long-term counterparty credit rating on SBI, S&P said.
According to Moody’s, SBI’s final ‘Baa3’ rating incorporates a one-notch uplift due to its assumption of the bank’s very high level of support from the government in a stressed situation.
The assumption of high government support is based on a combination of SBI’s large size and the critical role it plays in the country’s banking system, representing around 16.3 per cent of system loans and 17.6 per cent of system deposits as of March 2016, its nationwide reach, and the government’s 60.18 per cent ownership in the lender.
Fitch said after this issue, SBI’s core capitalisation is set to improve in the year to March 2017 from a core equity tier 1 ratio of 10.3 per cent in September 2016.
Fitch said the bank is likely to receive around $835 million in new capital from the government shortly out of the total $1.1 billion earmarked for this financial year, which is around five per cent of its 2015-16 equity and has plans to raise an additional $2.2 billion directly from the market, for which it has received shareholder approvals.