India-based Axis Bank has sold $350 million worth of Baa2/BBB- rated senior unsecured notes. The Reg-S deal was formally issued through the bank's branch at the Dubai International Financial Centre.
The deal, which was priced early Friday morning (Hong Kong time), has a 5.5-year tenor and a maturity date of September 30, 2015. The bonds were issued as part of Axis Bank's €2 billion ($2.7 billion) medium-term note programme.
Initial price guidance was set at 280bp over equivalent US Treasuries, which was later tightened to 275bp -- this is also where the final price was fixed. The coupon was set at 5.25% and the reoffer price was 99.581 to give a yield of 5.339%.
By the opening of Asian trading on Friday, the bonds had tightened considerably to yield 5.307% on the bid, which was equivalent to a spread of about 269bp over Treasuries, according to RBS financial markets data. By late Friday, the bonds had widened to 272bp, which was still comfortably inside the reoffer price.
The key benchmark for the transaction was ICICI Bank's $750 million bond that was issued in November last year. During initial guidance, ICICI was trading at 272bp over Treasuries, which is equivalent to 269bp over mid-swaps. At the time of final guidance, the demand for Axis had pushed the price flat to ICICI's secondary yield curve. And, in the end, Axis priced about 20bp inside the ICICI curve.
Investors also looked to the recently priced Bank of India $500 million issue. At the time of pricing, government-controlled BOI's 2015 bonds were quoted at a spread of 228bp over Treasuries. This meant that Axis came to market about 47bp wider than where BOI's bonds were trading in the aftermarket.
However, one source close to the deal noted that there is a "clear distinction" between BOI and Axis. Although both have the same tenor and a similar issue size, BOI operates within the government sector whereas Axis is a private bank, which would affect the line-up of investors looking to buy into the security.
Asian investors made up about 70% of the allocation, with Europe taking the remaining 30%. Asset managers scooped up 48%, private banks 30%, and banks 20%, with insurance funds taking the last 2% of the deal.
The bookrunners (Barclays, Citi, Deutsche, HSBC and J.P. Morgan) were able to secure an order book that was about four times subscribed -- with almost $1.4 billion of demand from 110 accounts.
This is a debut issue for Axis in the international debt capital markets and follows its inaugural equities issue in September 2009 when it completed a combined qualified institutional placement (QIP) of common shares and a sale of global depositary receipts (GDRs). The $720 million of equity was raised to boost Axis's tier-1 capital.
