Indian private-sector lender ICICI Bank took advantage of robust US demand early Friday morning to raise $1 billion from a five-and-a-half-year senior bond.
A number of Indian lenders have tapped the dollar market this year, including Syndicate Bank and Indian Overseas Bank, but ICICI is the first to tap professional investors in the US. The extra effort clearly paid off, as the bank upsized its offer from the expected $750 million on the back of strong US demand.
The deal priced at Treasuries plus 295bp, compared to initial guidance in the area of Treasuries plus 300bp. Citi, Deutsche Bank, HSBC and Royal Bank of Scotland were joint bookrunners.
The deal gathered an order book of $2.7 billion from more than 200 investors. US investors took 48% of the deal, Asian investors 35% and European investors 17%. Fund managers bought 55%, insurance 20%, government institutions and central banks 8%, banks 11% and private banks 6%.
According to one banker close to the deal, this was the tightest pricing ICICI Bank has ever achieved. The Treasuries plus 295bp pricing translated to mid-swaps plus 255bp. In comparison, when ICICI Bank issued it $1 billion 10-year bond late last year, it paid a spread of Treasuries plus 325bp.
The new November 2016s offered a pickup of 40bp over the ICICI Bank January 2016s, which traded at around Treasuries plus 255bp. By comparison, the spread between similar-maturity US Treasury bonds was 35bp, so ICICI Bank paid a new-issue premium of 5bp. This was considered tight compared to the perceived new-issue concession of 10bp to 13bp recently offered by HSBC Bank’s $1.5 billion five-year senior bond.
The bonds were bid 1bp inside reoffer during the US trading session on Thursday, but then widened 1bp outside reoffer on Friday morning Asia time. They traded within a range of Treasuries plus 292bp to 296bp.
A handful of Indian banks — including State Bank of India and Axis Bank — have sold primary bonds to professional US investors, but the extra documentation needed to tap that pool of liquidity has proven unnecessary for banks with smaller funding needs thanks to ample demand in Europe and Asia.
ICICI Bank’s bonds were reoffered at 99.665 to yield 4.82% and the coupon was fixed at 4.75%. The bonds mature on November 21, 2016. ICICI Bank is rated Baa2 by Moody’s and BBB- by S&P.
Elsewhere, the Indian pipeline continues to build. Vedanta Resources has mandated Barclays Capital, Citi, Credit Suisse, Royal Bank of Scotland and Standard Chartered as joint global coordinators and joint bookrunners for its international bond offering. Goldman Sachs and Morgan Stanley are also joint bookrunners and UniCredit Capital is a co-manager.
A global investor roadshow in Asia, Europe and the US starts today (May 23). The company is eyeing a 10-year bond of at least $1 billion. Vedanta’s proposed bonds are rated Ba2 by Moody’s and BB by S&P and Fitch.
