Reliance Industries Ltd., seeking to tap foreign demand for assets from Asia’s second-fastest-growing economy, plans to raise at least $1 billion in the biggest dollar-denominated bond sale by a non-bank India company.
The offering by Mumbai-based Reliance, India’s largest company by market value, would boost the country’s international bond sales this year to $5.5 billion, the most since $9.2 billion was raised in the similar period of 2007, according to data compiled by Bloomberg. Foreign investors more than doubled their holdings of Indian government and company debt this year to $17.3 billion as of Sept. 30, Securities & Exchange Board of India data show.
Billionaire Mukesh Ambani’s energy company will sell 10-and 30-year bonds to refinance acquisitions and fund investments in a record year for foreign takeovers by Indian companies, Moody’s Investors Service and Bloomberg data show. Yields on five-year Indian corporate bonds have fallen 50 basis points to within 75 basis points of government debt after averaging 171 basis points, or 1.71 percentage points, in 2009.
Reliance is “one of the blue chips of India,” said Jack Deino, who oversees about $1.6 billion of emerging-market debt at Invesco Inc. in New York and who’s considering buying the new bonds. “There would be a scarcity value to it. Anytime you’ve had any company that’s not a bank it’s been massively oversubscribed,” he said in an Oct. 1 interview.
Growth Outlook
India’s economy, which expanded by an average 8.5 percent in the last five years, will grow 9.4 percent this year and 8.4 percent in 2011, International Monetary Fund forecasts show. That compares with growth of more than 10 percent for China.
Indian Oil Corp., the country’s largest state-controlled refiner, raised $500 million from 4.75 percent bonds in January in the country’s last benchmark-size sale by a non-financial company. The notes yielded 3.012 percent and their spread over Treasuries narrowed to 202 basis points from 282 basis points on May 25, according to Royal Bank of Scotland Group Plc prices.
ICICI Bank Ltd., India’s second-largest lender by market value, plans to sell as much as $1 billion of bonds this month, two people familiar with the matter said today, asking not to be identified because details are private. The notes will have maturities of between five and 10 years and proceeds will help expand lending, one of the people said.
India is alone among its so-called BRIC peers of Brazil, Russia and China in having no sovereign dollar bonds to act as a benchmark. Reliance’s notes will be a guide for other borrowers seeking long-term funding, said Brayan Lai, a credit analyst at Credit Agricole CIB.
Rupee Gains
Reliance “will undoubtedly help other companies with this deal,” Lai said in a phone interview from Hong Kong yesterday. “Unlike bank bonds corporate notes are not very liquid, so this new pricing will create a usable yield curve.”
India’s rupee fell from a five-month high. The currency was at 44.725 rupees after reaching 44.235 rupees yesterday. The Indian currency has gained 4.4 percent in the past month, the best performance among the 10 most-traded Asian currencies.
Bonds issued by India’s government were little changed with the yield on the 7.8 percent note due May 2020 at 7.94 percent as of 12:26 p.m. in Mumbai, according to the central bank’s trading system.
India’s 10-year yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.93 percent. Comparable securities offer 7.7 percent in Russia and 3.3 percent in China and 2.44 percent in the U.S., Bloomberg data show.
Refinancing Debt
Reliance plans to sell its bonds with help from Bank of America Corp., Citigroup Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc, said Manoj Warrier, a spokesman for the company in Mumbai yesterday. Warrier declined to confirm the size of the offering.
The company will seek to raise at least $1 billion after talks with investors starting Oct. 6, according to two people familiar with the matter, who asked not to be identified because the details are private. Reliance Holdings USA’s senior unsecured bonds will be used to refinance $765 million of loans for shale-gas ventures and for “further business investments that may be pursued,” Moody’s said in a statement.
Moody’s rated the proposed debt Baa2, the second-lowest investment grade.
Ambani, ranked by Forbes India as the nation’s richest person with a net worth of $27 billion, told shareholders in June that Reliance is planning “mega” investments in power generation as well as expansion in telecommunications.
Credit Protection
Indian companies have announced $39.3 billion in overseas mergers and acquisition deals since Jan. 1, the busiest year for cross-border takeovers, according to Bloomberg data. Bharti Airtel Ltd.’s $10.7 billion purchase of the African assets of Zain, Kuwait’s second-largest phone operator, tops the ranking.
The cost of protecting Reliance’s dollar debt from default for five years rose 3.6 basis points yesterday in New York to 169.3 basis points, according to data provider CMA in New York. The contracts reached a two-month low of 165.7 on Oct. 1. The current prices compares with 184.4 for contracts linked to state-controlled Bank of India.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Shale Assets
“Investors are more concerned about the return of their principal rather than the return on their principal,” said Vikas Pershad, chief executive officer at Veda Investments LLC in Chicago, who said he may buy the new bonds. “Given the strength of Reliance’s balance sheet, the probability that an investor’s capital is safe in these capital raisings is high.”
Reliance has spent $3.4 billion since April buying U.S. shale-gas assets including acreage held by Atlas Energy Inc., Pioneer Natural Resources Co. and Carrizo Oil & Gas Inc. In his June speech to shareholders Ambani said Reliance plans to build a “significant position” in shale gas and to pursue “inorganic growth opportunities,” adding the company could double its enterprise value to $160 billion within a decade.
“What you’re seeing in India, more than China, Brazil and Russia, is a large selection of companies with healthy balance sheets providing safety of principal,” Pershad said in a phone interview yesterday. “Coupled with the outlook for the Indian economy, I think this augurs well for companies trying to raise capital abroad. I expect the trend both of capital raisings and acquisitions to continue.”
To contact the reporters on this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net;
To contact the editors responsible for this story: Will McSheehy at wmcsheehy@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
http://jodnet.blogspot.com
The offering by Mumbai-based Reliance, India’s largest company by market value, would boost the country’s international bond sales this year to $5.5 billion, the most since $9.2 billion was raised in the similar period of 2007, according to data compiled by Bloomberg. Foreign investors more than doubled their holdings of Indian government and company debt this year to $17.3 billion as of Sept. 30, Securities & Exchange Board of India data show.
Billionaire Mukesh Ambani’s energy company will sell 10-and 30-year bonds to refinance acquisitions and fund investments in a record year for foreign takeovers by Indian companies, Moody’s Investors Service and Bloomberg data show. Yields on five-year Indian corporate bonds have fallen 50 basis points to within 75 basis points of government debt after averaging 171 basis points, or 1.71 percentage points, in 2009.
Reliance is “one of the blue chips of India,” said Jack Deino, who oversees about $1.6 billion of emerging-market debt at Invesco Inc. in New York and who’s considering buying the new bonds. “There would be a scarcity value to it. Anytime you’ve had any company that’s not a bank it’s been massively oversubscribed,” he said in an Oct. 1 interview.
Growth Outlook
India’s economy, which expanded by an average 8.5 percent in the last five years, will grow 9.4 percent this year and 8.4 percent in 2011, International Monetary Fund forecasts show. That compares with growth of more than 10 percent for China.
Indian Oil Corp., the country’s largest state-controlled refiner, raised $500 million from 4.75 percent bonds in January in the country’s last benchmark-size sale by a non-financial company. The notes yielded 3.012 percent and their spread over Treasuries narrowed to 202 basis points from 282 basis points on May 25, according to Royal Bank of Scotland Group Plc prices.
ICICI Bank Ltd., India’s second-largest lender by market value, plans to sell as much as $1 billion of bonds this month, two people familiar with the matter said today, asking not to be identified because details are private. The notes will have maturities of between five and 10 years and proceeds will help expand lending, one of the people said.
India is alone among its so-called BRIC peers of Brazil, Russia and China in having no sovereign dollar bonds to act as a benchmark. Reliance’s notes will be a guide for other borrowers seeking long-term funding, said Brayan Lai, a credit analyst at Credit Agricole CIB.
Rupee Gains
Reliance “will undoubtedly help other companies with this deal,” Lai said in a phone interview from Hong Kong yesterday. “Unlike bank bonds corporate notes are not very liquid, so this new pricing will create a usable yield curve.”
India’s rupee fell from a five-month high. The currency was at 44.725 rupees after reaching 44.235 rupees yesterday. The Indian currency has gained 4.4 percent in the past month, the best performance among the 10 most-traded Asian currencies.
Bonds issued by India’s government were little changed with the yield on the 7.8 percent note due May 2020 at 7.94 percent as of 12:26 p.m. in Mumbai, according to the central bank’s trading system.
India’s 10-year yield is the highest among major economies except Brazil, where similar-maturity notes pay 11.93 percent. Comparable securities offer 7.7 percent in Russia and 3.3 percent in China and 2.44 percent in the U.S., Bloomberg data show.
Refinancing Debt
Reliance plans to sell its bonds with help from Bank of America Corp., Citigroup Inc., HSBC Holdings Plc and Royal Bank of Scotland Group Plc, said Manoj Warrier, a spokesman for the company in Mumbai yesterday. Warrier declined to confirm the size of the offering.
The company will seek to raise at least $1 billion after talks with investors starting Oct. 6, according to two people familiar with the matter, who asked not to be identified because the details are private. Reliance Holdings USA’s senior unsecured bonds will be used to refinance $765 million of loans for shale-gas ventures and for “further business investments that may be pursued,” Moody’s said in a statement.
Moody’s rated the proposed debt Baa2, the second-lowest investment grade.
Ambani, ranked by Forbes India as the nation’s richest person with a net worth of $27 billion, told shareholders in June that Reliance is planning “mega” investments in power generation as well as expansion in telecommunications.
Credit Protection
Indian companies have announced $39.3 billion in overseas mergers and acquisition deals since Jan. 1, the busiest year for cross-border takeovers, according to Bloomberg data. Bharti Airtel Ltd.’s $10.7 billion purchase of the African assets of Zain, Kuwait’s second-largest phone operator, tops the ranking.
The cost of protecting Reliance’s dollar debt from default for five years rose 3.6 basis points yesterday in New York to 169.3 basis points, according to data provider CMA in New York. The contracts reached a two-month low of 165.7 on Oct. 1. The current prices compares with 184.4 for contracts linked to state-controlled Bank of India.
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Shale Assets
“Investors are more concerned about the return of their principal rather than the return on their principal,” said Vikas Pershad, chief executive officer at Veda Investments LLC in Chicago, who said he may buy the new bonds. “Given the strength of Reliance’s balance sheet, the probability that an investor’s capital is safe in these capital raisings is high.”
Reliance has spent $3.4 billion since April buying U.S. shale-gas assets including acreage held by Atlas Energy Inc., Pioneer Natural Resources Co. and Carrizo Oil & Gas Inc. In his June speech to shareholders Ambani said Reliance plans to build a “significant position” in shale gas and to pursue “inorganic growth opportunities,” adding the company could double its enterprise value to $160 billion within a decade.
“What you’re seeing in India, more than China, Brazil and Russia, is a large selection of companies with healthy balance sheets providing safety of principal,” Pershad said in a phone interview yesterday. “Coupled with the outlook for the Indian economy, I think this augurs well for companies trying to raise capital abroad. I expect the trend both of capital raisings and acquisitions to continue.”
To contact the reporters on this story: Shelley Smith in Hong Kong at ssmith118@bloomberg.net Natalie Obiko Pearson in Mumbai at npearson7@bloomberg.net;
To contact the editors responsible for this story: Will McSheehy at wmcsheehy@bloomberg.net; Sandy Hendry at shendry@bloomberg.net
http://jodnet.blogspot.com
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