Export-Import Bank of India is "the closest credit the market can get to India issuing a sovereign". That was the word on the street when the 100% government-owned bank issued India's second quasi-sovereign in 2010 early yesterday.
The Reg-S $300 million five-year deal came to market with a 4.375% coupon and a February 2, 2015 maturity date. It was reoffered at 99.658, resulting in a yield of 4.452%, which was equal to 180bp over mid-swaps and 211bp over US Treasuries. This yield was fixed at the tight end of the initial guidance, which was set at 180bp to 190bp over mid-swaps.
At the close of Asian trading yesterday, the spread had tightened by 2bp to 178bp over mid-swaps. The equivalent spread over US Treasuries had come in 1bp to 210bp.
The bonds were on offer at a time when the markets, in the words of one source, "were swinging all over the place", which required some aggressive marketing by the arrangers. Over the past four days of trading, no two days have been consistent. Yesterday the markets took another hit as Standard and Poor's released a negative outlook on Japan's foreign currency rating.
Given the weakening market conditions, the pricing of Exim Bank was spot on for where the arrangers wanted it to be. After the pricing on Wednesday morning (Hong Kong time), the bonds traded 4bp to 5bp tighter, prompting one source to note that "it's always good to leave a few basis points as a dessert for investors".
In the end, the order book exceeded $1.5 billion. Lead arrangers Citi and Deutsche Bank took orders from 134 investors.
The bulk of investors came from Asia, which made up 77% of the final allocations, while Europe took 23%. Funds were the major buyers, accounting for 47%. This was followed by banks with 35% and private banks with 14%. Insurance and pension funds were given 4%.
"Indian foreign currency credits, particularly quasi-sovereign names, see strong support from non-resident Indians and domestic investors", said Brayan Lai, a credit analyst at Calyon. One reason, he said, is that money is flowing away from local currency government debt amid expectations of record deficit spending and inflation.
The Exim Bank bond is rated Baa3 by Moody's and BBB- by Standard & Poor's, suggesting it is a relatively safe investment.
The deal was compared to the State Bank of India's (SBI) $750 million five-year bond that was issued in October last year. When the initial price guidance for Exim Bank was announced on Tuesday morning (Hong Kong time), the SBI 2014s were trading at 190bp over mid-swaps. By the end of the day, against a weaker backdrop in the markets, SBI had widened to 193bp over, but late Wednesday it had settled back to 190bp over mid-swaps.
Exim Bank capped off a very hectic four days in the primary bond market with Evergrande and Cikarang launching deals at the end of last week, followed by the pricing of the Vietnam sovereign on Monday. And there is no pause in sight yet. Indonesia's Star Energy Geothermal (Wayang Windu) started a roadshow on Wednesday and Philippine lender Rizal Commercial Bank will begin meeting investors today -- both of them with the intention of selling new debt.