On cards: Move to make infra bonds more attractive
A special purpose vehicle (SPV) of GMR may get the first such guarantee from state-run India Infrastructure Finance Company Ltd (IIFCL). Many other infrastructure SPVs of companies such as L&T and JP Hydro are also in the fray for similar facility, sources in the know told FE. Bond issues of infrastructure SPVs do not get a favourable rating now. The idea is that a partial guarantee from a reputed financial institution like IIFCL will upgrade these bonds’ rating to ‘AA’ and make them eligible for investments by insurers and pension funds.
“An announcement on the partial guarantee or credit enhancement facility will be made by either the finance minister or the minister of state sometime between January 15-20,” said an official familiar with the development.
Already, IIFCL has sought Asian Development Bank’s assistance for the credit enhancement facility of up to $12 billion for three years, which will help in completing many long-gestation projects held up due to funding problems. IIFCL chairman SK Goel said the ADB board has approved the proposal and it will be formally communicated soon.
The new initiative is part of the ongoing efforts to reform the bond market to lure more investors, especially foreign sovereign wealth
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