Initial price guidance for issue stands at 270 bps over the treasury yield, sources say
IDBI Bank has priced its dollar-denominated green bond at 255 basis points over the five-year US treasury yield on Monday, according to information provided by sources till the time of going to the press.
The bank is set to raise $350 million through the five-year issue. Fitch Ratings has assigned the bank’s proposed senior unsecured debt an expected rating of ‘BBB-(EXP)’. The notes are to be issued by IDBI Bank’s Dubai International Financial Centre branch.
Green bonds are debt instruments where the money raised is used for funding renewable energy projects. This is the first dollar-denominated green bond issue by IDBI Bank and the second by an Indian bank.
Export-Import Bank of India (EXIM) was the first to issue dollar-denominated green bonds out of the country to raise $500 million in March this year at a tight spread of 147.50 basis points over the US Treasury yield. The issue by Exim Bank is believed to be the third one from Asia in this segment.
IDBI Bank’s deputy managing director BK Batra said the funds raised will be swapped into rupee and used for onshore renewable energy projects.
“IDBI has been focussed on green financing. Even when carbon credits were selling and getting traded, we had an exclusive desk for that. We had worked out an innovative financing scheme for financing carbon credits. We have earlier been running World Bank credit lines also in the areas of pollution control and related lines,” Batra added.
The initial price guidance for the issue stood at 270 basis points over the treasury yield, according to sources. BNP Paribas, Standard Chartered Bank, JP Morgan, HSBC (B&D), Citigroup and ANZ are the bankers to the deal, sources said.
The bank has notified in an exchange filing that the investor put option is at 100% if aggregate of direct and indirect government of India shareholding falls below 51%.
“The issuer will use the net proceeds from the sale of the notes to fund, or reimburse the issuer for its funding of, certain new and existing eligible green projects,” the exchange filing said.
According to NS Venkatesh, chief financial officer at IDBI Bank, the lender has already deployed $300 million into green projects and plans to invest close to $2 billion into this segment over the next 12-18 months.
Offshore bond issuances by Indian companies/banks have remained tepid this year compared to 2014. So far, Indian firms and banks raised close to $8.7 billion through offshore bonds. In 2014, Indian firms and banks had picked up a record $18.6 billion through this route.