Rural Electrification Corporation?s (REC) plan to raise $200 million of syndicated term loan through external commercial borrowing (ECB) has elicited good response from investors, the company claimed on Monday. The issue, which will close by August 14, has already attracted underwriting commitment of $ 375 million from banks like Mizuho Corporation Bank Ltd and Sumitomo Mitsui Banking Corporation.

REC has the flexibility to borrow up to $400 million under greenshoe option in case of over-subscription, company?s chairman JM Phatak said in a press conference on Monday.

State Bank (SBI) and Bank of Tokyo Mitsubishi UFJ (BTMU) lead arrangers and book runners have given underwriting commitment of $100 million each and Mizuho Corporation and Mizuho Corporation $ 75 million and $ 50 million, respectively.

REC already has in place approval from the Reserve Bank and expects to complete documentation by August 20. It may start drawdown from the tied up fund by the first week of September.

The five-year tenor loan has payable interest rate of 1.75% above London Inter Bank Offer Rate (Libor).

REC disbursed loans of Rs 21,000 crore in the last fiscal 2009-10. It has targeted a 30% growth in its loan disbursements this fiscal.

REC has planned to mobilise Rs 28,000 crore in the current fiscal 2010-11 to meet its funding commitment to the domestic power sector.

To diversify its investor base, the company has decided to raise $1 billion through ECB route.

The company held roadshows in Japan, Hong Kong and Singapore recently to seek investor support for its fund mobilisation programme. The response was very encouraging, Phatak said.

REC has applied to the Reserve Bank for infrastructure finance company (IFC) that will allow it to raise ECB up to 50% of its networth through automatic approval route. The company expects to get the status soon.

REC has plans to mobilise funds through Samurai bonds from Japanese market. During its recent roadshows in Tokyo, the company?s top management held discussion with officials of Japan Bank of International Cooperation (JBIC) to explore the possibility of the latter providing guarantee for the proposed bond issue.

?With JBIC guarantee, pricing of the bonds can be attractive and raising fund will become more competitive,? REC chairman said.