Reliance Industries has doubled the average life of its debt to around 7.5 years after its two highly successful overseas bonds issue were priced at the lowest coupon rate in Asia.
RIL Joint CFO Srikanth Venkatachari said post completion of the two bond issues — USD 1 billion on January 22 and USD 750 million on February 4 — the average life of RIL’s debt will double from around 3.75 years to around 7.5 years, in line with global energy players.
The company, he said, is in midst of its largest ever capex programme of over USD 30 billion across refinery, petrochemicals and the telecom 4G rollout.
“The foreign currency financing being tied up is primarily for RIL’s expansion projects in the refining and petrochemical businesses,” he said.
RIL’s USD 750 bond issue, which carried a tenor of 30 years, was priced at 4.875 per cent, and came on back of a 10-year USD 1 billion issue at 4.125 per cent interest.
“RIL is the only private corporate issuer of 30 years bonds in Asia for over a decade and the money was raised at the lowest ever coupon. This has to be seen in the context of other 30 year issuers from Asia being only sovereigns like the Republic of Korea and the Republic of Indonesia and quasi-sovereigns like China’s CNOOC, Sinopec,” he said.
The two bond issues of 10 years and 30 years followed up on the USD 800 million, 5.875 per cent perpetual bonds issue in early 2013. These perpetual bonds have a fixed for life coupon with no step ups and have no fixed maturity date.
The perpetual bonds were also the first of its type from Asia and achieved the lowest coupon for such an issuance globally.
“Post the completion of all drawdowns under the financing programme, the average life of the company’s debt will double from around 3.75 years to around 7.5 years, in line with global energy players,” he said.
Other than highlighting RIL’s unique ability to raise very long term capital by setting new pricing benchmarks for Asian issuers, the two bond issues in the last two weeks have also opened the window for other Indian issuers to evaluate the USD bond market as a long term source of financing.
“Given that RIL has a natural hedge in terms of its earning streams which are in USD or linked to USD, the focus is on foreign currency financing. In (telecom arm) Reliance Jio, given that the earnings will be in rupees, the debt will be pre-dominantly raised in India,” he said.
Venkatachari said the primary objectives of the financing programme was to diversify away from loan markets and increase the average maturity of debt.
Hence the concerted push to increase financing from the export credit agencies (ECAs) (up to 14 years door to door tenor) and the spate of long term bonds (10 years, 30 years and perpetual).
“Given the strategy of global procurement for the projects involving over 600 vendors, the focus was on tying up long term financing at very competitive financing rates backed by guarantees and insurance covers from various ECAs globally,” he said.
The company continues to look actively at liability management opportunities to refinance and extend maturities through the bond market.
RIL continues to be the only Reg S 144A 30 year private corporate issuer out of Asia since 2003 and achieved lowest coupon ever achieved by an Asian private corporate issuer for a 30 year issuance.
This was the first ever single tranche 30-year deal by a private corporate issuer out of Asia.
Bank of America Merrill Lynch acted as Joint Bookrunner and Lead Manager on the transaction.