Indian banks are taking full advantage of the strong demand for quality paper, with ICICI Bank closing a $750 million five-and-a-half year bond early Wednesday morning, after attracting $5.7 billion worth of orders.
The deal priced at Treasuries plus 400bp, at the tight end of the final guidance of Treasuries plus 400bp to 405bp. This was some 25bp inside the initial guidance, which was in the area of Treasuries plus 425bp.
The new ICICI bonds, which mature in February 2018, came at a negative new issue premium. The ICICI Bank 2016s were at Treasuries plus 390bp, which put fair value for a new ICICI Bank bond maturing February 2018 at Treasuries plus 410bp to 412bp, so ICICI Bank priced inside its curve.
Hot on the heels of ICICI Bank closing its $750 million bond, yet another Indian bank — Union Bank of India — went out with guidance for a new five-year bond on Wednesday, making it the third Indian bank to tap the market this week. The size was capped at $350 million and the initial guidance was Treasuries plus 410bp. This was revised to a final guidance of Treasuries plus 390bp to 395bp and on Wednesday afternoon, the books were already in excess of $1.3 billion. The deal priced at Treasuries plus 390bp, the tight end, and raised $350 million last night.
Union Bank of India ultimately attracted an orderbook of close to $2 billion from 150 accounts. It was allocated predominantly to Asian investors, which took 78%. European and offshore US investors were allocated 18% and 4% respectively. By investor type, banks were allocated 33%, fund managers 33%, private banks 30% and other investors 4%. The coupon was fixed at 4.625% and the notes reoffered at 99.726 to yield 4.687%.
So far, the bond issuance has been dominated by investment-grade issuers, though one investor described the 400bp spread offered by ICICI Bank as being "close to high-yield”. Banks are said to be readying high-yield bonds for September.
Bank of America Merrill Lynch, Citi, HSBC, J.P. Morgan and Standard Chartered were the bookrunners for ICICI Bank’s bond.