ICICI to mop up $1 bn overseas

ICICI Bank, the country's second largest bank, plans to raise another $1 billion through senior unsecured bonds and upper tier II bonds.

The proceeds will be used to support the growth of the bank and its subsidiaries, to increase its regulatory tier II capital, and for general corporate purposes.

The bank is looking to raise $500 million through senior unsecured bonds in two tranches with tenures of three and five years. The issue would have no call or put option.

ICICI Bank also proposes to raise up to $500 million through upper tier II subordinated bonds with 15-year maturity. The cumulative bonds carry a call option 10 years from the date of issue.

Citigroup, Deutsche Bank and Merrill Lynch have been hired as lead managers to the issue. Standard & Poor's Ratings Services today assigned its BB+ rating to the proposed $500 million senior unsecured notes and BB- rating to the proposed up to $500 million upper Tier II subordinated notes.

The rating differential between the senior unsecured notes and the upper tier II subordinated notes reflects the subordinated nature of the tier II bonds and the embedded interest deferral feature on the bank's capital adequacy ratio (CAR) dropping below the minimum required 9 per cent.

The bank's CAR (capital adequacy ratio) was 14.34 per cent at the end of September 2006, up from 11.52 per cent a year earlier.

Only last month, the bank had borrowed $1 billion from overseas markets to fund credit growth. The yen-denominated syndicated loan was the largest by an Indian bank. The loan was split into three tranches of $350 million for 364 days, $450 million for two years and $200 million for three years.

A total of 26 banks had participated in the syndication facility - the widest participation for any Indian bank syndication in the international markets.

This was the fourth time ICICI Bank has tapped the global debt market in 2006. In October, it raised $400 million through five-year bonds, priced at 120.6 basis points (one basis point is one hundredth of one per cent) over comparable US government security.

In August, the bank garnered $340 million through perpetual, hybrid tier-I securities at a coupon of 7.25 per cent. The pricing was at a spread of 194 bps over Libor, translating into a spread of 247 bps over 10-year US treasury bond.

Earlier in the year, ICICI Bank had raised $300 million through a commercial paper programme in the US to support the bank's growing international operations.

It has also raised Rs 2,700 crore from the domestic market through the issue of tier-I and tier-II bonds since January this year.

ICICI Bank's loans grew 47 per cent to Rs 1,63,785 crore at the end of September 2006 from a year earlier, while the industry growth is over 30 per cent.

The bank's loan assets overseas (including foreign currency finance to domestic companies) rose 56.25 per cent to about Rs 15,000 crore as on September 30, 2006 from a year ago.

The bank operates in 14 countries through branches, representative offices and subsidiaries.