Indian Oil Corp Mops Up $400m Forex Loan

The Indian Oil Corporation (IOC) has raised $400-million through foreign currency loans.

These deals were struck this week and will be used to finance oil imports and some of the major on going projects. Both these loan arrangements were signed in Hong Kong by Suresh Mathur, director, finance IOC.

The company raised $325-million through a short-term syndicated oil import facility.

The loan which was the largest-ever short-term loan raised by any Indian corporate was concluded at 19 basis points above LIBOR.

According to a Indian Oil Corporation press release, the deal received an

overwhelming response with 26 banks from 10 countries participating in the syndication.

 

The facility was jointly arranged by Bank of America and the State Bank of India.

This deal by the IOC will keep the oil major away from the spot market for sometime.

The $300-million is a short-term facility which has been specifically been raised to finance oil imports.

This will see IOC keeping away from the forex market for sometime, analysts said.

Although Indian Oil Corporation had targeted $300-million, the deal was closed at $ 325 million due to oversubscription.

The much hyped issue had introduced the concept of risk participation in a syndicated deal for the first time.

The syndicated loan had offered risk exposure and funded participation as the two types of options to the participating banks.

At least 15 banks opted for the risk exposure of $150 million while 10 banks lead by Bank of Baroda, Credit Commercial de France and Generale Bank have opted to for the funded exposure route.

The bank opting for the risk exposure route will earn fees for taking the risk exposure while the funds will be pumped in by the Bank of America.

Also these banks will not have the loans on their books. Bank of India, Sumitomo Trust and the Industrial Bank of Kuwait have participated through this route.

Public sector oil companies have been reeling under a severe cash crunch as the oil pool deficit is ballooning and is estimated to reach Rs 20,000 crore by March, 31, 1997.

In another deal, the oil company has raised a $75-million seven-year loan on a club deal basis for financing some of its major on going projects.

The loan arranged by ABN Amro and the State Bank of India was raised at 70 basis points above LIBOR.

The loan which does not have any call and put option has a bullet repayment facility at the end of the seventh year.

Raising a seven-year loan at 70 basis points above LIBOR without any call and put option is a good deal, a banker said.