$250 Million Subscription Offer For 100-Year Reliance Bonds

Reliance Industries Ltd has received offers amounting to $250 million for its $100 million, 100-year external commercial borrowing issued in the US market.

The company, which received the finance ministrys clearance on Monday, has received the offers at a benchmark rate of 380 basis points above the US treasury bill rate.

The company is now likely to request the government to allow it to exercise the greenshoe option and retain the surplus offers. Reliance Industries had applied to the government for raising $340 million through external commercial borrowings.

RIL managing director Anil Ambani, who was in the finance ministry for a meeting with senior officials, did not offer any comments on the companys maiden borrowing of this tenure. The company had concluded a 50-year Yankee bond for a sum of $100 million early last year. The bonds, with the longest maturity offering by an Indian sovereign or corporate body, had been priced at a yield of 10.6 per cent. The issue was sold through Merrill Lynch.

 

The bonds were offered in the Rule 144a private placement market to qualified institutional buyers (QIBs). The Yankee bonds were due for redemption on August 6, 2046, and included a put option which allows the shareholders to sell the debt back to the company at par on August 6, 2026. The issue was priced at a spread of 350 basis points above 10-year US treasury bill.

China, which had effected a $50 million sovereign borrowing last year for a similar period had managed a spread of 350-basis points.

Reliance Industries had also been the first Indian company to obtain country-risk rating from the international agencies like Moodys and Standard & Poors.

Interestingly, Reliances entry into the global markets for such a borrowing precedes a government effort to effect a borrowing of a similar duration. At present, the finance ministry is debating the modalities of raising sovereign borrowings from the international markets.

The Rakesh Mohan committee on infrastructure finance had made out a strong case for raising sovereign borrowings internationally. The idea was that the government could then set a benchmark for external borrowings.

The present thinking in the government is that with companies managing to obtain favourable terms internationally, the rationale of setting a benchmark through a sovereign borrowing will not necessarily hold.