Videocon International has finalised plans for a $35 million (Rs 126 crore) floating rate note (FRN) issue. The issue will be used for funding the 100 per cent export oriented unit of the company.
Peregrine Capital India will be lead managing the issue. The issue, for a 3-year period, has bullet maturity at the end of the period. The pricing is expected to be in the range of 200 to 225 basis points above the London Inter Bank Offer Rate (Libor). The Libor is currently ruling at 6.06 per cent. This is significantly higher than the rates at which other Indian corporates have raised money. The effective cost of borrowing is expected to be between 8 to 8.25 per cent taking into account the natural hedge the company will derive from exports. Hence, it may not need forward cover for the same.
Sources said the rate the company is paying is higher compared to the rate financial institutions pay. For instance, Industrial Development Bank of India (IDBI) raised funds below 80 basis points over Libor for a seven-year period. Videocon is raising funds for a period of three years.
Industrial Credit and Investment Corporation of India (ICICI) raised subordinated debt at a little over 90 basis points over Libor.
However, industry sources point out that Videocon being a manufacturing company cannot be compared with a financial institution.
That apart, both IDBI and ICICI are sovereign-rated institutions.
