The leads initially announced the deal as a $300 million offering with guidance released on Monday at around 75bp over mid-swaps. However, that range was tightened further as the deal picked up traction during the marketing period to 73bp over mid-swaps.
The $400 million deal prices at a re-offer of 99.739% on a coupon of 5.875%, to yield at 5.396%, equating to a spread of 120.6bp over Treasuries or 73bp over mid-swaps. The deal is rated Baa2/BBB-/BB+ by MoodyÆs, Fitch and S&P.
Aside from the tight pricing, the most notable aspect of this trade was its Reg-S only structure. In the past, ICICI has maintained a very beneficial relationship with US investors. It is listed on the New York Stock Exchange and both of its two previous deals û an upsized $500 million five-year bond offering also via Deutsche Bank and Merrill Lynch in November 2005 and the $340 million perpetual non-call 10-year deal completed in August via JPMorgan, Merrill Lynch and Morgan Stanley - were bought largely by US-based accounts. The 2010 deal saw US investors heavily represented at 47% of the final book, while the perpetual sold 37% into the US.
In Tuesday's deal - despite not having a US 144a - the leads were still able to attract a large order book that closed at $1.1 billion, an oversubscription ratio of over 2.75 times, bought by 80 accounts.
Indeed, the book was very well represented geographically, with investors originating from 20 different countries. Geographically, Singapore accounts bought 31% of the book, the UK bought 10%, continental Europe 10%, Hong Kong 8%, Switzerland 7%, Japan 7%, Korea 5%, Middle East 4%, offshore US accounts 5%, and 13% going to others.
In terms of account type, funds bought the lionÆs share of the trade buying up 40%, banks bought 19%, official institutional investors, insurers, pension funds and corporates bought 26%, and retail investors accounted for the final 15%. The deal picked up a number of investors who were new to the credit or had not previously accessed India exposure, with some of these investors placing large orders in the $40 million to $50 million area.
Ultimately the deal was conducted very astutely with the leads releasing guidance to give the book some early momentum and then proceeding to convey to the market that they weren't looking to squeeze on pricing.
As noted, this is the second foray into the offshore debt market for IndiaÆs second largest lender this year. In August, ICICI priced a $340 million perpetual non-call 10-year deal to yield at 7.341%, which equated to a spread of 247bp over Treasuries or 194bp over mid-swaps. That deal is now trading at 232bp over Treasuries or 178 over Libor. Although not a clear comparable, it outlines the strength of ICICIÆs performance in the secondary market.
The deals most obvious comparable is ICICIÆs 2010 deal. That deal was quoted at 70bp over Libor at the time of the new deals pricing. Given that ICICI curve is worth about 5bp and its five-year CDS is currently running at 74bp to 79bp, the new deal prices 2bp through the implied ICICI curve of 75bp over mid-swaps and 3.5bp through its own mid-CDS.
This in itself is an impressive result when compared to recent deals such as Hutchison Whampoa which priced at a 6bp premium to its mid-CDS curve and Woori bank which priced 8bp wider than its mid-CDS.
Furthermore, the deal prices inside of the implied curve of Bank of India (BoI). BoI completed a Reg-S $250 million five-year bond in September 2005 via Barclays, Deutsche and HSBC, currently that deal is trading at 69bp over Libor. Specialists calculate that the curve between a September 2010 and an October 2011 bond would be worth about 5bp, meaning a new BoI deal would price at around 74bp over Libor.
As of the end of June, ICICI reported total assets of Rs2.663 trillion ($60.5 billion). ICICI has created a network of 614 branches and extension counters.
The bank has seen its gross non-performing loan ratio improve dramatically as the credit environment has continued to ease. In 2003, ICICI reported an NPL ratio of 9.1% for fiscal year end, for the same period ending in 2006 that number was down dramatically to 1.5%.
Until recently, ICICI Bank had operations based solely in India. However a rapid expansion programme was instigated in 2004 with the opening of banking subsidiaries in the United Kingdom, Canada and Russia, as well as extending its branch network to include Hong Kong, Bahrain, Singapore, Sri Lanka and Dubai and representative offices in the United States, the United Arab Emirates, China, South Africa and Bangladesh.
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