Public sector company Rural Electrification Corp (REC) plans to raise $250 million through external commercial borrowing within a month, according to a senior executive.
Investors are looking to lend at about 210 basis points over the 12 month London interbank offered rate (Libor), which is currently at 0.6676%, said the executive. The power financer aims to raise a total of $1 billion (about R6,700 crore) through external commercial borrowings this year.
REC, which aims to raise a total of R37,000 crore this year, will also raise R5,000 crore through tax-free bonds. Of this, R3,500 crore will be raised through a public issuance of these bonds. In the first tranche, the company plans to raise R1,500 crore, with the option to retain up to R3,500 crore of subscription. The issue is being offered in three tenures of 10-year at a coupon of 8.01%, 15-year at 8.46% and 20-year at 8.37%. Of the total offering, nearly 40% of the issue is booked for retail customers — those that subscribe up to R10 lakh — and they will be offered an additional 20 basis points on all three tenures.
The tax-free bonds are priced at a discount of G-Sec, and since the G-Sec yield has climbed sharply in the last few months, the companies will be able to offer higher rates and attract more investors looking to lock in investments at higher rates for longer tenure.
In FY13, the issuers offered coupons between 6.86%-7.08% and 7.02%-7.19% for 10 years and 15 years respectively. Last year, companies were able to raise just over one-third of the total amount allowed by the government as investors were not very satisfied with the offered coupon. In FY12, five companies were able to raise their target funds of R30,000 crore through the tax-free bonds issue at 8.2% and 8.3% for 10 and 15-year terms, respectively.