Mumbai, Sep 25: Largest power producer NTPC on Tuesday raised $500 million from overseas bond sales at 3.05 per cent over the US treasury, making it one of the cheapest 10-year dollar bond sales by a domestic corporate.
The issue, which was oversubscribed a full eight times, is also the first one after the government last week relaxed external borrowing route by slashing the withholding tax on such funds to just 5 from 20 per cent. This is also the first by a government-owned company this year.
According to merchant banking sources, which included Citi, RBS, Barclays and Deutsche Bank, today's sale is part of the $2 billion overseas borrowing (medium term note) that the state-run power utility had planned way back in 2006, when it had mopped up $350 million in 10-year dollar money through unsecured bonds and another $500 million last year.
NTPC officials could not be contacted immediately.
On the pricing, an i-banking source said the final pricing was fixed at 305 basis points over the US treasury (which is 0.25 per cent), resulting in a yield of 4.764 per cent per annum.
This is significant as the guidance was 325 bps over the US T-bills, and the final payable coupon is fixed at 4.75 per cent per annum, sources said.
A merchant banker said, the huge response to the issue further reiterates that foreign investors are only happy to buy quality debt from domestic corporates.
All the recent issues, kicked off by SBI by raising $1.25 billion in July at record low rates, which was followed up by $750 million by Exim Bank in two installments, ICICI Bank ($750 million), Axis Bank ($250 million), IDBI Bank, Indian Overseas Bank, Union Bank etc, had huge oversubscriptions from foreign investors, especially those from Asia.
Today's sale, which has a BBB- rating from both S&P and Fitch Ratings, is part of NTPC's euro-bond medium term note (E-MTN) offering, sources said, adding that the money was raised in US dollars. An E-MTN means debt raised in US dollars but in which American resident investors are not allowed to participate.
On the successful completion of the bond sale, Rajiv Nayar, heads of capital markets origination division at Citi India, which was the lead-arranger for the deal, said, "We see reduction in withholding tax to 5 per cent as a key driver for increased issuance activity in the USD-bond markets by domestic corporates.
"NTPC is the first to take advantage of this move and received a very positive response. The issue was oversubscribed by over eight times, at 4.75 per cent coupon for 10 years. This sets the right tone for other domestic corporates to follow," Nayar said.
He further said, this transaction marks the first USD bond issuance by a PSU this year, demonstrating the strength of the underlying credit and the strong management of NTPC.
Nayar further said this NTPC issue is the second consecutive $bond offering by Citi for the company.
On the investor profile, a merchant banking source said Asian investors constituted 62 per cent, followed by Europeans at 31 per cent and US offshore investors accounted for 7 per cent.
Out of this fund managers constituted 57 per cent, bank, private banks 18 per cent, and i-banks 14 per cent, insurers and pension funds 8 per cent and others 3 per cent.
