ICICI raises $750 mn in overseas bonds

Four other banks ready to tap the market.

To fund the expansion of its overseas business, ICICI Bank, the country’s largest private lender, has raised $750 million (Rs 3,498 crore) in dollar-denominated senior unsecured debt issued from its Bahrain branch.

The 64-month fixed rate notes carry a coupon of 5.5 per cent, which translates to a spread a 292.6 basis points over the equivalent London Inter-Bank Offered Rate (Libor). In a statement, the bank said the issue received orders worth $3 billion from more than 250 investors.

When contacted, a bank spokesperson said, “ICICI Bank is raising long-term funds for meeting business requirements of its overseas branches, including financing the existing loan book and meeting growth opportunities. The end use of the funds would be in the bank’s overseas branches.” The notes will be listed on the Singapore exchange.

At the end of September, the bank’s overseas loan book accounted for 27 per cent of the total loan book. In recent months, Indian companies are looking to tap overseas markets to meet their funding needs. Availability of resources with Indian banks would help meet these debt requirements. Also, banks are taking advantage of the low rate regime, coupled with a fall in credit spreads, to access funds at a low cost.

This bond issue, however, is not a part of the bank’s $5-billion medium-term note (MTN) programme. An MTN programme is a funding programme used by issuers to receive bond debt funding on a regular and continuous basis. The advantage to issuers is that they are not required to produce a full suite of legal documents each time they want to issue notes. Earier this week, the private sector bank had met investors in the US and the United Kingdom to gauge their appetite for its MTN programme. As of now, the outstanding amount under the MTN programme is around $1.7 billion.

The bank is currently well-capitalised with a capital adequacy ratio (CAR) of 17.7 per cent. Its Tier-I CAR is 13.3 per cent, the highest among large Indian banks.

Over the next few weeks, at least four Indian banks are expected to tap the overseas bond markets to raise funds. The list includes Axis Bank, which has started the process to raise at least $500 million (Rs 2,332 crore) under its Euro 2 billion (Rs 13,858 crore) MTN programme. Public sector lenders Union Bank of India, IDBI Bank and Bank of Baroda have also announced their intentions to tap the international markets.

Last month, State Bank of India set the ball rolling by raising $750 million through its MTN programme. Bankers said the SBI bond issue would act as a benchmark for other lenders. The issue was priced at mid-swap plus 90 basis points (bps). Mid-swap is the equivalent of Libor for longer maturity bonds.

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