Bankers play name game to keep competitors guessing

The Swiss Alps and the financial markets may be worlds apart, but State Bank of India (SBI) apparently thinks otherwise. When the country’s largest bank decided to issue Swiss franc bonds in February this year, the plan was initially named Project Alps.

In case this sounds confusing, listen to a senior banker: “It was called Project Alps. A lot of discussion was taking place, mails were flying around. We did not want to disclose who was the potential issuer, as it was SBI’s maiden issuance in Swiss francs.” In short, the bank did not want anybody to get any hint of its bond issue.

 

SBI initially decided to name it Rolex bonds, after the famous Swiss watch maker. It then changed the plan, as it may have meant infringement of a trademark.

The bank raised 325 million Swiss francs or Rs 1,500 crore by selling these offshore bonds in February. The five-year bonds were priced at 185 basis points over the five-year franc mid-swaps, at an annual coupon rate of 3.375 per cent.

Project Beacon was what Bank of India decided to call its dollar bond issuance in February. It had a similar dollar bond issuance a year earlier, named Project Bernard.

“This is a common practice in merger and acquisition deals, where information is critical. The names can be anything, like tsunami, to indicate the deal has to be closed quickly. The objective is to keep information away from competitors,” said an official with a Mumbai-based foreign bank.

Bankers initially used Greek letters alpha, beta and gamma as project names. “As these letters have been extensively used, different names are now used, that do not offer any clue on the deal specifics. Sometimes, old names are also repeated for identical deals,” said a senior official of a private sector bank.

Sometimes, fancy names are also used to popularise financial instruments like bonds and debentures in a particular region. The yen-denominated bonds issued by non-Japanese companies in Tokyo are called Samurai bonds, named after ancient Japanese warriors. The name of Dim Sum bonds, for yuan-denominated ones issued in Hong Kong, is gaining popularity across the globe. The Kangaroo bonds issued by non-Australian entities to raise Australian dollars and the Bulldog bonds sold by non-British companies in London are yet to become household names.

So, the next time you hear about Dragon bonds (US dollar-denominated bonds issued in Asian countries other than Japan) or Sushi bonds (euro bonds issued by a Japanese company), remember, there may be some purpose behind those names.