SBI sells $1 bn bonds, sets new benchmark in pricing at 3.25%

Mumbai: State Bank of India today set a new benchmark in overseas bond pricing at a low 3.25 per cent for its just-concluded $1 billion debt sale programme in the global markets which has received an oversubscription of 4.3 times, according to merchant bankers of the deal.

The coupon on the latest bond sale by SBI is 150 basis points lower than the one it is paying for its five-year unsecured bonds sold last July, when it raised $1.25 billion at 3.75 percent.[caption id=“attachment_697279” align=“alignleft” width=“380”] SBI chairman Pratip Chaudhuri. PTI[/caption]

This makes the current issuance cheapest/lowest in history not only for the bank but also for the domestic companies, the merchant bankers said.

“State Bank has successfully sold $1 billion senior unsecured bonds, denominated in US dollars and having a tenor of five years at a coupon of 3.25 percent, to over 250 international investors,” the nation’s largest lender said in a statement today.

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“SBI is very pleased the transaction received such success. Strength of the order book and the fine pricing reflects the level of investor confidence in the SBI credit,” chairman Pratip Chaudhuri said on the bond sale.

The bank said these bonds, maturing in April 2018, are the third US dollar bond issuance in the 144A/Reg S offering format after the $1.25 billion raised last July and $1 billion in July 2010, and is part of its $10 billion medium term note programme.

“The offering was priced at a spread of 255 bps over the 5-year US treasury bills, equivalent to a price of 99.904 percent and yield of 3.271 percent per annum. The bonds are denominated in US dollar, and will a bear fixed interest of 3.250 percent per annum. The notes will mature on 18 April 2018,” Hemant Contractor, SBI managing director and group executive (International Banking), said.

“We are extremely pleased with the strong interest shown by top global investors in the offering. In the backdrop of a volatile global environment, the transaction was well executed in the short time window available,” he added.

BNP Paribas, Citigroup, Deutsche Bank, HSBC, JP Morgan, and SBI Capital Markets acted as joint lead managers to the issue.

A Citigroup spokesperson told PTI that the fixed rate bond sale got an oversubscription of over 4.3 times. The final pricing got tightened by 20 bps from the initial guidance of 277 bps over the US T-bills, the spokesperson said.

SBI raised the funds through its London branch late last night and the bonds, which carry a rating of ‘Baa2’ from Moody’s and ‘BBB-’ from S&P, will be listed on the Singapore Exchange, Citigroup said.

On the huge success of the issue, Sunil Agarwal, head of institutional client group at Deutsche Bank India, said “the size and strength of the orderbook demonstrates investor confidence in the management team and State Bank’s long-term prospects.

“Also, the State Bank senior management clearly articulated a positive vision for the bank as well as the country to the investors around the world.”

On the order book of the fixed rate senior unsecured notes, Agarwal said the issue received interest from over 250 accounts, and constituted 56 per cent from Asia, 24 percent from US investors and 20 per cent from European investors.

On the type of investors, the Citigroup said 44 percent were asset/fund managers, 29 percent banks, 14 percent private banks, 8 percent insurers, and the remaining 5 percent sovereign wealth funds, pension funds and corporates.

Deutsche Bank attributed the lower pricing to the respect and credibility SBI has amongst global investors.

“State Bank is one of the most respected borrowers from India, and will set the tone for other issuers in 2013,” noted David Greenbaum, head of debt capital markets at Deutsche Bank South Asia.

“As a consistent borrower in 144-A over the past few years, SBI has developed a strong investor following and is able to command tight pricing,” he added.

JP Morgan India debt capital markets head Madhur Agarwal said domestic companies are raising foreign debt because overseas funds are much cheaper than rupee ones.

The SBI’s bond sales helps the bank adjust its asset-liability mismatches well, he added.

With the SBI issue, firms including Reliance Industries, Bharti Airtel, ICICI Bank, HDFC Bank, Exim Bank, PowerGrid and Tata Communications, among others, have raised a whopping $7.5 billion so far this year, which is 75 percent of what India Inc mopped in the entire previous year.

PTI