OVL raises USD 2.21 billion to finance Mozambique deal

ONGC Videsh Ltd, the overseas arm of state-run explorer Oil and Natural Gas Corp (ONGC), today said it has raised a record USD 2.21 billion by selling bonds to foreign investors.
Proceeds of the bond sale, the biggest ever from Asia, will be used to repay short-term bridge loan that OVL had taken to finance acquisition of 16 per cent stake in a giant gas field off Mozambique.
The company said it raised USD 750 million by selling bonds of 5-year tenure and another USD 750 million by selling 10-year bonds. It raised an additional 525 million euro (about USD 712 million) in 7-year bonds.

"These Bonds are guaranteed by ONGC," the company said in a statement here. "The Reg S Bonds will be issued in dual currency with two tranches of USD 750 million each for 5-year and 10-year tenors, respectively and one tranche of Euro 525 million for 7 year tenor."
The transaction is the largest ever Reg S bond deal from India till date. It was also the maiden offering by OVL in the Euro bond markets. The dollar offering was oversubscribed about 4.5 times while the Euro bond sale got 3.6 times more bids than what the company was seeking.
OVL said the 5-year and 10-year dollar bonds were priced at 160 basis points and 207 basis points above the similar tenure US treasury yields. A basis point is 0.01%.

The effective coupon works out to 3.25 per cent and 4.622 per cent, respectively.

The Euro offering was priced at a fixed coupon of 2.75 per cent per annum, it said.
"OVL intends to use the bond proceeds to refinance its bridge loans availed for the recently concluded acquisition of 16 per cent stake in Rovuma Area 1, Offshore Mozambique," the statement said.
BNP Paribas, Citigroup, DB, RBS and Standard Chartered acted as joint book-runners and lead managers for the issue.
In June last year, OVL teamed up with Oil India Ltd to buy Videocon Industries' 10 per cent stake in deep water gas field in Mozambique's Rovuma basin for USD 2.48 billion.

OVL followed it up by acquiring another 10 per cent stake from Anadarko Petroleum Corp of US for USD 2.64 billion in August.
The Videocon stake was split between OVL and OIL in 60:40 ratio. To finance its six per cent buy, OVL in January raised USD 1.5 billion one-year bridge loan facility from a consortium of 9 banks.
To pay for the Anadarko stake acquisition, it had in February raised USD 2.5 billion in foreign loans.
Rovuma Area 1 is estimated to hold recoverable natural gas resources in the range of 45 to 70 plus trillion cubic feet, which are to be converted into liquid gas (liquefied natural gas or LNG) for shipping to consumers like India.

OVL currently has 33 projects in 16 countries. Its present production is about 170,000 barrels of oil and oil equivalent gas per day and had total oil and gas reserves of 637 million tonne oil equivalent as on March 31, 2014.