The latest SBI deal certainly broke new ground. When the lead bankers û Barclays Capital, Citigroup, Deutsche Bank and HSBC û told investors to consider a price of 125bp-135bp over mid-swaps for the hybrid tier-one tranche, it was clear that the upgrade effect had provided a boost.
ôWithout doubt, investors wanted to benefit from the upgrade,ö says one banker. ôWe saw a lot more diversity and a surge of new interest.ö
Even at the slack end of the price range, SBIÆs guidance on the hybrid was 7bp inside the trading price of ICICIÆs five-year paper.
At lunchtime in London yesterday, the hybrid tranche eventually priced at 120bp over mid-swaps, or 169.3bp over US Treasuries, with a coupon of 6.439%. The floating-rate paper priced at 38bp over Libor. The market might describe ICICIÆs paper as comparable, but the price certainly isnÆt. At closing, SBIÆs hybrid was about 23bp inside ICICIÆs own perpetual paper.
On the floating tranche, the deal priced just 1bp more expensive than the offer side of SBIÆs own 2011 û comfortably through the curve.
Investors placed bids of $2.2 billion for the hybrid tranche and $1.05 billion for the floater. Exact details on the order book were still a bit sketchy last night, but preliminary numbers the hybrid was distributed 42% to Asia, 53% to Europe and 5% to offshore US investors. By investor type, it was sold 40% to banks, 40% to fund managers and 20% to others.
The floating tranche was dominated by bank bidders, who like floating-rate assets because they are a match for their floating-rate liabilities. As such, banks accounted for 70% of the distribution, fund managers for 20% and 10% others. By geography, 43% went to Asia, 45% to Europe and 12% to the US.
SBI was patting itself on the back last month after raising $200 million in five-year floating-rate funds without paying any new issue premium, but at 45bp that deal now looks like it was a steal for investors.
SBIÆs decision to follow that trade with a benchmark deal was fuelled by the response to ICICIÆs landmark $2 billion offering, a deal that doubled its investor base and also priced without any new-issue premium. UTI Bank also followed suit, pricing comfortably inside the offer price of ICICIÆs floating-rate deal.
Barclays, Citigroup and Deutsche Bank are also mandated to run an offshore deal for Bank of Baroda.
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