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The Oil and Natural Gas Corporation (ONGC) has made a debut in the overseas market by raising $800 million in its first ever dollar bond issue to partly finance its recent acquisition of interest in an oilfield in Azerbaijan. ONGC Videsh Limited (OVL), its wholly-owned subsidiary, floated a five-year tenor $300-million unsecured bond and a 10-year note for $500 million.
In a press statement, ONGC said the issue was over-subscribed with an order book aggregating close to $3 billion.
Although OVL always has the comfort of ONGC providing the funding, it will have to increasingly depend on other financing options to fund its acquisition plans. This is the first time after its acquisition of UK-listed Imperial Energy Plc for $2.1 billion in 2009 that OVL has raised a loan. The company said it will use the proceeds to replace bridge financing availed for acquisition of stake in the Azerbaijan field.
D K Saraf, OVL’s managing director, told Business Standard that with the raising of dollar bonds, the company would no longer need to hedge its borrowings. “Both are cash inflow and outflow are in dollars so it makes sense for us to borrow in dollars,” he said.
OVL priced the five-year tranche Reg S at US Treasury plus 200 basis points (bps) and the 10-year at T plus 230 bps. The 10-year bond will bear fixed coupon of 3.75 per cent per annum, while the five-year note will bear 2.5 per cent per annum. The notes are unconditionally and irrevocably guaranteed by ONGC.
Earlier this month, the company had announced the completion of acquisition of Hess Corporation’s 2.7213 per cent participating interest in the Azeri, Chirag and the Deep Water Portion of Guneshli Fields in the Azerbaijan sector of the Caspian Sea and 2.36 per cent interest in the Baku-Tbilisi-Ceyhan Pipeline. This is the first acquisition of a producing property made by ONGC Videsh in the Caspian Region and would bring 9 per cent additional proved reserves to OVL. OVL's share of output would be around 1 million tonnes a year.
