RIL will raise $1.2 billion with a tenure of five years at 145 basis points (bps) over the London interbank offered rate (Libor) while $550 million with a tenure of seven years would be raised at around 160-165 bps over Libor, according to a banker involved in the deal.
“Even though the loan is at a premium over Libor, the rate is exceedingly attractive given the turmoil in global markets,” said Asit Bhatia, managing director and co-head of investment bank BoFA-Merrill Lynch. The $1.2-billion facility may be drawn in US and Singapore dollars, euros and Japanese yen, and proceeds will help the company refinance $1.2 billion of multicurrency loans signed in 2008, a banker said.
The company will use $1.2 billion to refinance the current outstanding multi-currency facilities and $550 million for expansion and to take up new projects in its refining and petrochemical businesses.
Reliance Industries’ billionaire chairman Mukesh Ambani told shareholders in June that he plans to spend R1,50,000 crore over the next three years to expand businesses ranging from gas to telecommunications. The company also raised $800 million through perpetual bonds in Januray, 2013. The latest loan has been fully underwritten by 19 banks. The deal has witnessed significant oversubscription even before being launched into syndication.
Bhatia said most companies are looking at foreign currency loans as the cheapest option to raise cash from overseas markets. They bear in mind that US 10-year treasury yields have climbed 180 bps in the last few months and it does not seem that they will come back to the levels of 1.60%, seen earlier this year.
Before May 22, Indian companies had raised a record $11 billion through overseas bonds but after the US Federal Reserve warned that it may cut down its monthly bond purchases of $85 billion, US treasury yields shot up, making raising of overseas bonds expensive for companies. Some of the companies have delayed or cancelled their