Oil marketing company Hindustan Petroleum Corporation is looking to tap the overseas bond markets by issuing 10-year dollar bonds, debt market sources said. “The size of the issue is likely to be close to $500 million, although nothing is concrete as of now. Offshore markets seem to be conducive at present and we expect the yields to remain soft,” said an investment banker. The 10-year US Treasury yield — usually taken as a benchmark for pricing overseas issues — is currently trending close to 2.24%. The issue is likely to be a ‘Regulation S’ in which investors from Asia and Europe usually participate. Moody’s Investors Service has assigned a ‘Baa3’ rating to the foreign currency senior unsecured bonds to be issued by HPCL.
“HPCL’s baseline credit assessment (BCA) reflects its position as India’s third-largest state owned refiner of crude oil and third-largest distributor of petroleum products in the country. The BCA also reflects the company’s modest financial leverage and its potential cash flow volatility as a result of its exposure to industry cyclicality,” the Moody’s release said. Fitch Ratings has assigned HPCL’s proposed US-dollar-denominated notes an expected rating of ‘BBB-(EXP)’.
Standard Chartered, Citi, DBS, MUFG and SBI Caps are the bankers to the deal, a source pointed out. According to Bloomberg data, HPCL had last issued bonds in 2013 to raise Rs 1,000 crore at a coupon rate of 8.77%. However, this is not the first time an oil and gas company from India is tapping the overseas bond market. Earlier in the year, Bharat Petroleum Corporation had raised $600 million by selling 10-year dollar bonds.
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Recently, Adani Ports and Special Economic Zone priced its 10-year one month dollar bond at 195 basis points over the 10-year US Treasury yield to raise $500 million. Meanwhile, a few companies are in line to raise funds via the debt market. Rural Electrification Corporation and Samvardhana Motherson Automotive Systems Group are looking to tap offshore bond markets to raise funds, according to sources.