Indian banks, after missing out in their direct exposure in the $6 billion syndicated Tata-Corus deal, have lined up to participate in a big way in the secondary market for the deal, conducted by Standard Chartered Bank.
The UK-based Standard Chartered, which was one of the banks to have syndicated the Tata-Corus funding deal, has already offloaded a majority of its own $2.5 billion exposure in secondary market transactions. A number of Indian banks, including State Bank of India (SBI), have bought parts of the debt from Standard Chartered. SBI alone has bought over $1 billion of the Tata-Corus debt from Standard Chartered Bank. StanChart is hardly left with $750 million of the debt in its own book and would like to bring it to zero in future. The Tata Group is the largest global institutional customer of Standard Chartered Bank.
?By offloading the entire Tata-Corus funding, we will be again in a position to expand our exposure further for the group,? said Bala Swaminathan, managing director, regional head-client relationships, India & South Asia. For Standard Chartered, the secondary market transactions have been very profitable as the banks, which bought in the secondary market had to buy at slightly higher rates than the rate at which the deal was struck with the original financial institutions. Besides, the US subprime crisis had its impact on the rates. The secondary market deal has a mechanism called ?price flex? by which the new higher rates are agreed among the original funding agencies, institutions which take exposure in the secondary market and the company which had received the original funding. According to Swaminathan, the bank had already committed over $10 billion to India Inc for overseas buys over a one-year period. Meanwhile, the bank globally has acquired two small companies- one aircraft leasing company, Pembroke and one oil and gas consultancy firm, Harrison Lovegrove, which will have Indian implications.