Export-Import Bank of India (Exim Bank) on Monday is understood to have priced its Formosa bonds at 100 basis points over the three-month dollar Libor, according to sources aware of the deal. Exim Bank is believed to have raised $400 million through the issue which has a tenure of five years. The initial price target stood at 115 basis points over the three-month libor. A Formosa bond is a bond issued in Taiwan denominated in a currency other than the Taiwan dollar. These bonds are usually subscribed by long-term Taiwanese investors. Exim Bank’s bonds will be listed on the Taipei Exchange and the Singapore Stock Exchange i.e. investors from Asia may also be able to take part in the issue. Standard Chartered, JP Morgan and MUFG are the bankers associated with the deal, according to a source.
Moody’s Investors Service has assigned a ‘Baa3’ rating to the proposed US dollar-denominated senior unsecured notes issued by Exim Bank from its $10 billion global medium-term note programme, through its head office in India. Fitch Ratings has assigned the bank’s proposed notes an expected rating of ‘BBB-(EXP)’. Foreign currency bonds out of India getting priced on a floating rate basis is not a very common phenomenon. According to an investment banker, this deal is likely to be the second foreign currency bond deal out of India, which has been priced with Libor as the benchmark. SBI issued dollar bonds earlier this year at a spread of 95 basis points over the Libor.
“The floating rate market has been dormant and is picking up slowly. Banks would be comfortable pricing their bonds on a floating rate considering that any possible rise in interest rates will be passed on to the borrowers over a period of time. Considering that central banks across the world are hinting at interest rate hikes, investors might get interested in the idea of investing in a floating rate return. However, uncertainties still exist considering the softer treasury yields,” said a banker aware of the deal. Not many Formosa bonds have been issued out of India. In 2015, Reliance Industries had issued Formosa bonds to raise $200 million.