Exim received strong interest with a book size of $7 billion before the US market opened as investors from across the world poured in bids for a piece of a sovereign backed entity.
Bankers said Exim’s huge issuance could prod others from the country also to tap the overseas debt market amidst easy liquidity and low interest rates.
“Rates are very low. The US ten year is no longer at its lowest but still at less than half of its five year average. It is currently trading at 0.92% which is less than half of its five year average of about 1.98%. Exim is a frequent issuer in the market but the timing and size of this issue makes it a bechmark for future issues this year,” said a person involved in the transaction.
Investors who participated in the issues include Singapore’s sovereign wealth fund GIC, China Life Insurance Co, Swiss wealth manager Pictet Group, Hong Kong based AIA Group, Qatar Insurance Co, Hong Kong based asset manager Value Partners Group, US based MFS Investment Management and Singapore’s United Overseas Bank (UOB).
Strong investor demand meant that bankers could price the issue at 145 basis points over the 10 year US treasury tighter than initial guidance of 185 basis points above the US treasury which gave it a coupon of around 2.37% the lowest on a 10 year bond issue out of India and down from the 3.25% it had to pay for a similar issue last year. One basis point is 0.01 percentage point.
The 10 year US treasury is off its all time low of 0.32% in March 2020 however, its still way off its recent high of 3.30% in October 2018.
Barclays, MUFG, Standard Chartered, HSBC, JP Morgan and Citibank are the bankers to the issue.
State Bank of India (SBI) has also lined up a similar $1 billion 10 year issue ridding on Exim’s success, people familiar with the bank’s plans said. SBI and Exim did not respond to emailed queries.
“SBI is in readiness and is just waiting for the Exim issue to price. Based on the demand we have seen it won’t be surprising if SBI also hits the market on Wednesday or Thursday. We should expect good demand for that one too as SBI though not 100% owned by the government is seen as quasi sovereign,” said a second person involved in the transaction.
This will be the first dollar bond from SBI since it raised a total of $1.25 billion through dual tranched three and five year bonds in January 2019. Indian banks use dollar funds to lend overseas to Indian companies and for investments abroad.
Rating agency Fitch has rated Exim’s bond at BBB-, in line with India’s sovereign rating. “Exim’s rating reflects Fitch’s expectation of a high probability of extraordinary state support to the bank, in times of need, subject to the sovereign’s ability to support. This view stems from Exim’s high strategic and systemic importance due to Exim’s unique policy role, strong government linkages and the state’s 100% ownership in Exim under the bank’s founding act of parliament,” Fitch said in a note.
Bankers are hoping that the sovereign backed Exim’s issue will rekindled India Inc’s interest in the market after a dull 2020 in which just about two dozen Indian companies collectively raised $14.01 billion down from $26.5 billion in 2019.
