HDFC Bank raises $500 mn from overseas bonds

Funds were raised by offering a coupon of 3%

Country's second largest private sector lender HDFC Bank today raised $500 million from an overseas bond sale programme as part of its $2-billion medium-term bonds sale plan.

The funds were raised by offering a coupon -- a periodic interest payment -- of 3%.

The three-year unsecured senior bonds (RegS) received an over-subscription of more than four times at $2 billion from over 150 investors. The benchmark issue will mature in November 2016, and is priced at 255 basis points over the three-year US treasury, Standard Chartered Bank India capital markets head Jujhar Singh told PTI.

When contacted bank's treasurer Ashish Parthasarathy said the effective interest that an investor will be getting will be 3.13%. This would be same as in its five-year issue sold in March this year, when the bank had mopped up another $5 million.

He also said the money will be used for on-lending to its overseas customers.

Apart from StanC, other merchant bankers included JPMorgan, Bank of America Merrill Lynch, and Barclays.

Giving a break-down of the investors by region, Singh said 51% were from Europe, 43% were from Asia, and the remaining 6% were offshore US investors.

From an investor type point of view, Singh said asset/fund managers constituted a majority of 63%, followed by banks with 27%, public investors at 5%, private banks at 3% and insurers/ pension funds constituting 2%.

Rating company Standard & Poors has assigned BBB- rating to the issue, which was launched yesterday.

S&P said the rating reflects the long-term issuer credit rating on the bank. The proposed notes will constitute direct, unconditional, unsecured, and unsubordinated obligations of the bank. They shall at all times rank at par among themselves and with all other unsecured obligations of the bank, S&P said in a note.

So far this calander year, corporates like Reliance, Bharti Airtel, ICICI  Bank Exim Bank, Tata Communication, Union Bank, among others had lapped up over $13 billion through overseas bond issues between Janaury and mid-May.

However, since then the appetite appears to have waned as cost of funds jumped in overseas markets following the US Fed's indication in late May to wind down its $85 billion monthly bond buying programme.

In the entire 2012, domestic companies had raised a little over $10 billion.

The HDFC Bank issue indicates the revival of the corporate interest in rasing funds from abroad as they appear to don't see any possibility of doemstic interest rates coming down any time soon.

Regulation S bonds or RegS bonds are those offered to non-US residents and qualified institutional buyers (under an exception to US securities laws enacted in 1990) and do not enjoy the same legal protection as other issues enjoy.

On March 3, HDFC Bank had raised $500 million at 3% coupon in a five-year bond sale. This was cheapest money the bank had raised so far as it had got 10 times the demand.

Shares of HDFC Bank, which for the first time in a decade missed  its 30%-plus growth in profit in the September quarter with a 27% jump, commands the highest premium amongst the global banking stocks, according to analysts.

The scrip closed at Rs 668.90, up 1.34% on the BSE today.