MUMBAI, June 9: ANZ Investment Bank, arranger and underwriter to Power Finance Corporation's (PFC) seven-year $100-million foreign-currency loan, is finding it difficult to close the deal. Sources in the cross-border loan market anticipate a shortfall in investor response, ranging from $50 million on the higher side to a still acceptable $15 million, assuming relationship banks chip in.Sanctions and a coupon of 115 basis points in a poor loan market is affecting the transaction, which has a "put" option at the end of five years for investors. Almost three weeks after the completion of roadshows held in Mumbai, Singapore, Bahrain and London, response thus far to the loan is termed "rather lukewarm" by the cross-border loan market sources.
"It looks as if the coupon needs to be hiked for the loan to go through...failing which, the loan may well `devolve' on the underwriters, ANZ Investment Bank," bankers say.
The extent of shortfall is seen as high as $50 million to $15 million in a best-case scenario.But PFC has nothing to worry: the $100 million is a fully underwritten one.
Bank of India, Skandinaviskabank and Fuji Bank have sub-underwriting commitments of $20 million each, while the Arab Banking Corporation's commitment is $10 million. While this covers 70 per cent of the loan, these banks may finally take up only around $45-$50 million, say sources.
PFC's loan was structured ahead of the Pohkaran blasts, and initial investor interest from banks has undergone a substantial change, say sources.
A senior official of ANZ Investment Bank said: "It is not right to say that there is a shortfall. A few banks are yet to get back to us...give us a week to ten days time...we expect a clearer picture by then." ANZ Investment Bank did not reveal details of the firm commitments received so far to the loan.
INSIGHT -- Sharper yields hit PFC
The Power Finance Corporation's travails over getting its issue subscribed are not surprising, given the sharp jump in the yields of Indian paper in the secondarymarket abroad. Although there have been instances of fine rates being managed by Indian corporates (the loan to SAIL at Libor plus 19 basis points being one such instance), the loans which are relationship-oriented have much finer rates than the ones being marketed. Since the PFC syndication is being sold in the market, it is finding it difficult to get subscribed even at Libor plus 115 basis points. It needs to be remembered that loans to Indian financial institutions are being traded in the secondary market abroad at over 200 basis points over Libor.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
