HDFC Bank's $1-billion global AT-1 bond issue priced at 3.7%

HDFC Bank's maiden Additional Tier-1 (AT-1) capital bonds issue worth $1 billion has been tightly priced at 3.7 per cent compared to initial indicative yield of 4.12 per cent.

Market sources said the response was strong with demand in the region of $4 billion-$4.5 billion. Prominent investors in the offering include GIC, Fidelity.

Bankers who managed the issue were international players like Bank of America, Barclays and Standard Chartered. The road shows for bonds opened on Monday and covered 125 investors.

Rating agency Moody's has assigned “Ba3” rating to HDFC Bank's AT-1 capital bonds.

The Ba3 rating is three notches below the bank's baa3 Baseline Credit Assessment (BCA), reflecting the probability of impairment associated with non-cumulative coupon suspension. The rating also factors in the likelihood of high loss severity when the bank reaches the point of non-viability.

This was the bank's maiden AT-1 bond offering in the international market to raise debt capital. This opens the US market for Indian lenders to tap the market with such an offering, merchant bankers said.

The bank’s total Capital Adequacy Ratio (CAR) stood at 19.1 per cent as on June 30, 2021 (18.9 per cent as on June 30, 2020). Its tier 1 capital stood at 17.9 per cent in June 2021 (17.5 per cent in June 2020). The Common Equity Tier 1 Capital ratio (CET1) was at 17.2% as of June 30, 2021. It has a very small pool of AT-1 capital bonds at 0.5 per cent.