IIFCL extends partial guarantee to Rs 451 crore infra bonds

Government owned IIFCL today announced extending partial guarantee to the issuance of Rs 451 crore worth bonds of Renew Wind Energy (Jath), thereby enhancing the credit rating of the bonds.
The move would open the debt market for infrastructure projects which are primarily dependent on the banking sector.
"The India Infrastructure Finance Company Limited (IIFCL) announced the issuance of India's first infrastructure bond issuance credit enhanced by it," said the country's premier infrastructure financing institution.
The transaction involves issuance of Rs 451 crore bonds partially guaranteed by IIFCL thereby enhancing its rating by Renew Wind Energy (Jath).
The issuer is a subsidiary of Renew Power Ventures and operates 84.65 MW wind power project in Maharashtra.

Infrastructure projects are generally rated BBB or A, whereas the investors prefer higher rated bonds.

Manila-headquartered Asian Development Bank (ADB) is IIFCL's Backstop Guarantor.
The bonds would be listed on the NSE.
In a blog, ADG said the bond is the first issue under a Rs 720 crore project bond guarantee facility set up in 2012 by ADB and IIFCL to draw more institutional investors into critical infrastructure projects in India.
"In many ways, this is a landmark achievement, as credit enhancement is the crucial missing link that will allow institutional investors to invest in these bonds. It should also pave the way for others," it said.

With this issuance of these bonds, Renew Wind Energy (Jath) has been able to replace its existing debt with bonds having much higher tenor and at the same time with substantial reduction in interest burden.
"This bond issue would open up the bonds markets to infrastructure projects and will lead to the development of the Indian debt capital market," said IIFCL.
Currently, banks provide most of the funding for infrastructure projects in India, whereas worldwide Debt Capital Markets are the major source of such financing.
ADB further said guarantees on up to three more project bonds are expected under the programme by the end of the year.

IIFCL further said the bond would enable channelisation of long term funds from investors like insurance companies and pension funds into infrastructure sector.
This initiative would also provide investment opportunity to the overseas investors who may not like to take project construction risk but may prefer taking exposure in operational infrastructure projects, it added.