ONGC borrows $1 bn for Imperial buy

Oil & Natural Gas Corporation, India’s biggest energy exploration company, borrowed Rs 5,250 crore ($1 billion) to help finance its take over of UK-based Imperial Energy, a person involved in the matter said.

ONGC Videsh sold one-year commercial paper to about 15 investors paying interest of 8.15 per cent, said the person, who declined to be identified before an announcement.

Citigroup arranged the sale, which will help fund the New Delhi-based firm’s £1.4 billion ($2.1 billion) acquisition of explorer Imperial, the person said. ONGC Finance Director D K Sarraf couldn’t be reached.

ONGC tapped the commercial paper market after a series of interest rate cuts in Asia’s third-largest economy reduced borrowing costs. Reserve Bank of India Governor Duvvuri Subbarao has lowered the benchmark interest rate four times since October to protect India from a deepening global recession. Overseas bond sales by Indian companies have stalled since ICICI Bank raised $75 million in July from an 8 per cent 10-year deal for its UK unit, data compiled by Bloomberg show.

Power Finance Corporation, a state-run lender to Indian utilities, last week sold Rs 1,590 crore of bonds maturing July 2010 that pay a coupon of 8.7 per cent.

ONGC’s local-currency debt is rated A2 by Moody’s Investors Service, the sixth-highest investment grade.