HDFC Bank is set to raise up to $500 million through three-year dollar-denominated bonds, said a person familiar with the plans. The dollar issue is under the private sector lender’s $2-billion medium-term-notes (MTN) issue plan.
The coupon for the bond issue has been fixed at 260 bps over three-year US Treasury, which works out to 3.17%. The bonds are set to mature in November 2016 and will be raised through the lender’s Bahrain branch, according to HDFC Bank. The issue was rated “BBB-” by S&P Ratings Service on Wednesday. The bonds issued by the private sector bank will have a Reg S status, which means they need not be registered with the US Securities and Exchange Commission. Prior to this, HDFC Bank had raised $500 million in February this year, through a five-year dollar bond issue at a coupon rate of 3%. The higher coupon is reflective of the market conditions prevailing right now.
Over the last few months, raising foreign funds has become more expensive than in early 2013, owing to tough macroeconomic conditions and the possibility of liquidity shortage in global markets.
So far this calender year, corporate India raised more than $11billion from overseas bond sales between January and mid-May. However, issuances slipped sharply after US treasury yields jumped in late May following the US Federal Reserve’s indication that it would begin to taper its $85-billion monthly bond-buying programme. However, since then, there has been a deferral of any tapering, which has helped cool yields, encouraging Indian corporates to return to the overseas bond market.
Earlier this month, public sector lender Canara Bank had raised $500 million through its London branch, after paying a hefty price of 5.25% on a five-year bond issue.