Power Finance Corporation (PFC) has priced its green dollar bonds at 157.50 basis points over the 10-year US Treasury yield to raise $400 million, sources aware of the deal confirmed to FE. The initial price guidance on the bonds was 180 basis points over the Treasury, which was then revised to a final guidance of 160 (+/- 2.5) basis points. This indicates that the yield on the bonds came down from the initial price guidance. The bonds received bids worth $1.25 billion from investors till the time of the revised price guidance, a source indicated. An investment banker close to the deal said that the issue witnessed considerable response from investors. “This is the tightest ever spread for a debut PSU issuer for a 10-year paper over the last 15 years. The issue received significant interest from high quality, real money institutional investors,” the banker said. Barclays, Standard Chartered and SBI Caps are the bankers to the deal.
Fitch Ratings has assigned the green bonds an expected rating of ‘BBB-(EXP)’. “The issuer will allocate the net proceeds from the sale of the notes to the financing of eligible green projects, such as energy efficiency or renewable energy projects,” Fitch said in a release. PFC is hitting the offshore bond market after almost two decades. According to Bloomberg data, the last time the company raised funds in the overseas bond market was in 1999 when it picked up $100 million via seven-year paper at a coupon rate of 6.31%.
Given this, bankers said that the spread on Rural Electrification Corporation’s 10-year dollar bonds issued in June this year would help in arriving at an indicative pricing for PFC’s issue. According to Bloomberg, REC’s dollar bonds were quoted at a spread close to 150 basis points over the 10-year US Treasury yield on Tuesday. When REC hit the market in June, it had priced the bonds at 167.50 basis points over the Treasury to raise $450 million. This spread was considerably tighter than the initial price guidance of 200 bps over the Treasury. The year 2017 has seen overseas bond issuances from India hit $13.675 billion so far. The last issue was by Lodha Developers International, which issued dollar bonds to raise $125 million.