Exim Bank bonds worth $1 bn oversubscribed

Mumbai: The Exim Bank has started the New Year on a high note raising $1 billion through a dollar-bond sale to international investors, offering just 2.25 per cent for the ten-year money, setting a new low in pricing. The issue was oversubscribed four times or worth $4 billion as against $1 billion on offer, managing director David Rasquinha said, adding that in Asia the issue was oversold within three hours of the launch with the order book hitting $1.75 billion on Monday morning.

"At 2.25 per cent (US treasury+145 bps), the coupon is a record low for any 10-year bond issuance out of the country," he said. The issue has many a first, Rasquinha said, pointing to the lowest coupon (2.25 per cent per annum) ever for a large $ bond offering by a domestic issuer, and is also the first investment-grade dollar bond sale from Asia ex-Japan in 2021 and also the largest from Asia ex-Japan in the year.

Again, this is the first EMBI eligible 144a/RegS bond from Asia ex-Japan in 2021. Regulation S/144a bonds are issued by foreign issuers in the US debt market and are denominated in US dollars. I-bankers are expecting higher debt money to come to domestic shores this year given the record low-interest rates. Companies will also be raising money to meet the likely capex need or repayment demands as the economy returns to normalcy after the year-long pandemic. In January 2020, the Exim Bank had raised $1 billion in 10-year dollar money offering US Treasury plus 1.70 bps.

Normally, the bank issues 5, 7 and 10-year debt to meet its project export needs. For Exim Bank, the current issue saw the largest order book and over-subscription (four times) for a RegS issuance. The Exim Bank, with a substantially dollarised balance sheet, is one of the largest domestic issuers of long-term debt in international debt capital markets and its paper is treated as quasi-sovereign as the bank is fully owned by the government.

The funds from the sale will be used to support project exports, overseas investment by way of long-term credit and its export lines of credit portfolio, the bank said. Taking a cue from the massive over subscription in Hong Kong and Singapore, the bank tightened the initial price guidance by 40 bps from T+185 bps.

At close, with US investors chipping in, the issue was oversubscribed by over 4 times, the bank said. As much as 55 per cent of demand came in from Asia, 29 per cent from the US and 16 per cent from the EMEA (Eastern & Middle-eastern Africa) region and 68 per cent of the issue was snapped by fund managers, 17 per cent by sovereign wealth funds, central banks and insurers, 14 per cent by banks and the remaining 1 per cent by private banks, others. The issue is rated BBB- by Fitch and Moody's. Harsha Bangari, deputy managing director of the bank said this is the only 10-year sale by a domestic financial institution in the last one year.

"The EMBIG index eligibility of the bonds has helped in price tightening by 40 bps, demonstrating strong confidence of investors in the India story and in Exim Bank," she said. Barclays, Citigroup, HSBC, JP Morgan, Mitsubishi UFJ Financial Group and StanChart were joint lead managers and book-runners. The bonds offer a coupon of 2.25 per cent and mature on January 13, 2031 offering a yield of 2.363 per cent at an issue price of 98.999. The bonds will be listed on Singapore and London exchanges along with the INX. In 2020, forex debt issuance was dull with issuers collectively mopping around $14 billion.