ICICI prices $750 million bond in difficult markets

In tough market conditions, ICICI belatedly followed State Bank of India to raise cash in the international bond markets late on Friday. India's biggest private sector bank managed to issue a $750 million five-year bond when the market for Asian credits, after a record year for new issuance -- both in terms of volume and number of deals -- seemed almost closed as fund managers counted their blessings or licked their wounds before year-end appraisals.  

The launch followed "investor updates" in Asia, Europe and the US on Monday through Wednesday, during which joint bookrunners Bank of America Merrill Lynch, Credit Suisse and HSBC canvassed price guidance of 337.5bp to 350bp. The deal was sold to US investors through the Securities and Exchange Commission's Rule 144A and to other international investors via Reg-S.

The issue pays a coupon of 5.5% a year, and was reoffered at 99.826 to yield 5.54% to a maturity date of March 25, 2015. And, as always it seems, it priced at the tight end of guidance -- no bank has boasted that its bonds priced at the cheap end of initial guidance this year -- at 337.5bp over the benchmark five-year US Treasury yield. The yield also translated into mid-swaps plus 295.3bp, about 45bp inside the secondary trading levels of ICICI's 2012 US dollar bonds which were trading at Libor plus 340bp at the time of pricing.

The size of the order book within the pricing range amounted to more than $3 billion from 260 accounts. This included a large number of new investors to ICICI -- institutional and private banking -- as well as strong interest from existing holders, according to people familiar with the deal. The time and effort spent in filing for Rule 144a status paid off, with a 47% allocation to US investors; 33% was allocated in Asia and 17% went to Europe.

Real money accounts were the main buyers. Fund managers took 60% of the issue and insurance companies bought 10%; 30% was allocated to banks, including their retail customers.

The most recent comparable issue, State Bank of India's 2014-dated bond, was trading at 212bp over Libor at the time of pricing. Adjusting for the slight difference in maturity and applying a slight new issue concession, that "implies that ICICI priced their new issue approximately 70bp back from SBI, which is in line with the difference between the two credits in the CDS market", said bankers.

In September, Standard and Poor's reaffirmed its BBB- rating for ICICI. At the time it noted that, as of March 31, 2009, the bank's regulatory capital adequacy ratio stood at 14.73% compared with the minimum regulatory requirement of 9%.