PFC to raise ¥10 bn through ECB route

Anindita Dey & Ujjal K Basu Roy

Mumbai, Dec 6: The Power Finance Corporation (PFC) has once again hit the foreign currency borrowing market for a 10-billion yen loan.

The fresh funds will be mopped up as part of the external commercial borrowing and the tenure of the loan will be for a period of five years. According to bankers, almost all the leading merchant bankers are in the process of putting in their quotes for the loan syndication which needs to be submitted before December 10. However, the pricing will be fixed anywhere in the range of 100 basis points (bps) to 125 basis points above Libor, which is the range offered to other borrowers in the ECB market like ICICI and HDFC in the same period couple of months back. The loan structure carries a greenshoe option for additional subscription to the tune of 2 billion yen.

Bankers, however, added that ICICI did not go ahead with the loan syndication due to the high pricing. Bankers also added that this loan will be raised for meeting on lending purposes by the power financier. The loan will attract the withholding tax, which has come into effect from June 1, 2001. However, with yen currency, the whole pricing works out far cheaper than dollar denominated loan. PFC earlier had plans for arranging a loan of 5 billion yen.

After deliberating for months, the issue was finally put on the back-burner. The loan was to be for a tenure of seven years with an average life of five years, priced with stepped-up pricing: over 57 basis points over Libor for the first two-and-half years and at 67 bps over Libor for the remaining life-period. The amount, if it had been raised, would have gone towards funding various power projects. PFC had also decided to float a $5 billion power sector fund to speed up reforms and to restructure the ailing power sector. Further, power sector lending is expected to touch around Rs 3,400 crore by end-March this year with disbursements crossing Rs 3,500 crore. In the meanwhile, PFC has also initiated a process of raising around $80 million loans for meeting the working capital expenses.