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Reliance Industries sold a $750 million 30-year bond on Wednesday morning, just a fortnight after it priced India’s first bond of the year, extending its tenor whilst making use of improved market sentiment.
The Mumbai-based Indian oil and gas group run by Mukesh Ambani priced its latest Reg S/144A bond at Treasuries plus 262.5 basis points, which is 22bp tighter than its initial price offering, according to a term sheet seen by FinanceAsia.
It has a coupon of 4.875%, which is the lowest coupon achieved by an Asian private corporate issuer in the 30-year bucket.
“The issuer was opportunistically looking do to a longer tenor and patience paid off,” a Hong Kong-based debt capital market banker told FinanceAsia. “Reliance received impressive results on the 30-year bond, with investors not only recognising the quality but scarcity of the issuer.”
Market sentiment turned positive on Tuesday morning, with a number of issuers taking advantage of the window. For starters, Greece’s finance minister is backing a debt exchange rather than the writedown proposed by the Greek prime minister, while crude oil prices also surged from below $50 per barrel to $54 after BP indicated it would cut 2015 investments — which is constructive for Reliance Industries.
Asian credit spreads tightened after London markets opened, with credit default swaps — a measure of corporate credit risk — and Asian indices coming in some 2bp. The iTraxx IG Asia index was quoted at 109bp/111bp.
Order books for Reliance’s latest bond reached $2.3 billion from more than 160 accounts, with 47% of the notes going to Asian investors, 45% to US investors and the remainder to European accounts.
Fund managers subscribed to slightly more than half of the offering, followed by insurers with 31%, private funds with 8%, central banks and sovereign wealth funds with 6%, banks with 2% and private banks with 1%, according to the source familiar with the matter.
The improvement in risk-taking activity not only helped garner strong support for Reliance’s deal but other transactions, including Shimao Property’s $800 million seven-year bond and Tower Bersama’s $350 million seven-year note.
Reliance Industries raised a $1 billion 10-year senior unsecured bond on January 21, which attracted a global order book of $4.5 billion from 272 accounts.
Comparables
The closest comparables for Reliance Industry’s bond include its existing 6.125% bond maturing in October 2040, which was trading at a yield-to-maturity of 4.9%, according to a source familiar with the matter.
Other comparables include Korea Gas and China National Offshore Oil Corp’s outstanding notes expiring in January 2042 and April 2044. They were trading at a YTM of 3.4% and 4.05% and have a coupon of 6.125% and 4.875% respectively.
“Although the pick-up to Reliance’s existing 2040 bond initially looks a tad skinny, we note that the ongoing low-yield environment is pushing credit curves flat as cashed-up life insurers — whose yield targets get more challenging by the day — compete for scarce long-dated investment-grade assets,” said a Hong Kong-based credit analyst.
The company reported third-quarter earnings in January, which showed that net debt to Ebitda had risen to 0.33 times, compared to 0.04 times at the end of the 2014 financial year. Gross debt was reported at Rs1.5 trillion ($24.3 billion) against liquid assets of Rs787 billion.
Declining crude oil prices hit the company's financials, with revenue down 15% and Ebitda down 7% quarter-on-quarter.
Barclays, Bank of America Merrill Lynch, Citi and HSBC were the joint bookrunners of the Baa2/BBB+ transaction.
