The bonds are being issued under the bank’s $2 billion medium-term note (MTN) programme and are an extension of its 3.25% $400 million notes issued earlier this year. The issuance was carried out by the London branch of the bank.
The initial price target stood at 135 basis points over the five year US Treasury yield. The issue is a Regulation S issue in which investors from Asia, middle east and Europe usually take part. The bonds are listed on the Singapore stock exchange.
“This is the tightest pricing on a fixed rate dollar bond of an Indian bank since financial crisis,” claimed an investment banker. The issue was over-subscribed close to 2.5 times. Axis Bank and Standard Chartered are the bankers to the deal.
Moody’s Investors Service indicated in a release that Canara Bank’s (Baa3 stable, ba3) proposed senior unsecured tap bond issuance under its $2 billion Medium-Term Note (MTN) programme carried out from its London branch has no impact on Canara Bank, London Branch’s Baa3 foreign currency senior unsecured debt rating.
“The Baa3 foreign currency senior unsecured debt rating is anchored on Canara Bank’s ba3 baseline credit assessment (BCA) and Moody’s assessment of the likelihood of a very high level of support from the Indian government (Baa3 positive) in a stressed situation,” the note read.
The ratings agency pointed out that Canara Bank’s BCA of ba3 is underpinned by its weak asset quality; and while its gross nonperforming loan (NPL) ratio is somewhat better than its domestic peers, it is significantly weaker compared to its ba3 global peers, with a trend of increasing NPLs.
In August, the bank had priced its five-year bonds at 150 basis points over the five-year US Treasury yield to raise $400 million.
Indian firms and banks have raised a record $12 billion in 2017 via foreign currency bonds. The last major foreign currency bond issue was from Export-Import Bank of India which priced its Formosa bonds at 100 basis points over the three-month dollar Libor. A Formosa bond is a bond issued in Taiwan denominated in a currency other than the Taiwan dollar.
In the remaining three months of this year, a few banks and low-rated firms are likely to approach the market, according to investment bankers. These include large size private and state run banks as well as first time low-rated issuers.