IIFCL readying for overseas bond issue

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SummaryIIFCL will most likely get an approval to raise up to $1.5 billion when the board meets.

India Infrastructure Finance (IIFCL) will most likely get an approval to raise up to $1.5 billion when the board meets on September 13, a senior executive said. IIFCL is looking to float its maiden dollar-denominated bond issue and the firm is in discussions with multilateral agencies — the World Bank and Asian Development Bank — to secure a credit enhancement that will help it raise the funds at a lower cost. The infra lender made presentations to the ADB and World Bank on Monday.

“IIFCL is working on the credit enhancement from multilateral agencies. We will opt for such an enhancement if it works out to be cost-effective since it should fetch us a better rating,” an IIFCL executive told FE on Monday. “A credit guarantee by higher-rated institution will help us get better pricing,” he said.

Indian Railway Finance Corporation (IRFCL), which has received board approval to raise up to $1 billion, is likely to hit the market first. However, IRFC is not pursuing any credit enhancement options, an executive who did not want to be named told FE.

IRFC and IIFCL are rated on par with the Indian sovereign at BBB–. The World Bank has a AAA rating by Moody’s. IIFCL has also held talks with Japan Bank for International Cooperation, which has a Aa3 rating.

The government recently allowed three public sector finance companies to raise up to $4 billion through quasi-sovereign bonds from the overseas market, following which the three infrastructure finance companies have are working on approvals from their respective boards.

The government has allowed Power Finance Corporation (PFC), IIFCL and REC to raise up to $4 billion from the overseas market as it looks to increase inflows by $11 billion in FY14 to stem the rupee's slide. IRFC has been allowed to raise up to $1 billion, PFC and IIFCL can raise up to $1.5 billion each.

Earlier this month, finance minister P Chidambaram had also said that another $4 billion would be mopped up by the oil public sector units who are permitted to raise additional ECBs. Of the three oil PSUs, while IOC has been allowed to raise $ 1.75 billion, the other two — BPCL and HPCL — will mop up $1 billion each.

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