ICICI Bank has sold $1 billion worth of senior unsecured 5.75% fixed-rate 10-year bonds, marking the first senior US dollar deal with a 10-year maturity to be issued by an Indian bank.
The notes were issued by ICICI's Hong Kong branch and priced late Monday night, Hong Kong time, under Reg-S/144A format. The bonds will mature on November 16, 2020.
The Baa2/BBB- (Moody’s/Standard and Poor’s) rated notes were reoffered at 99.542 to yield 5.811% at the time of pricing. This was equivalent to a spread of 325bp over the 10-year US Treasury yield.
The rarity of being the first 10-year dollar bond from an Indian bank and ICICI Bank's strong credit story led to a strong performance both in the primary and secondary markets.
The deal was five times subscribed, with lead managers Barclays Capital, Citi and Deutsche Bank having accumulated $5 billion of orders from 325 accounts.
India’s second largest private bank last came to market in July of this year when it sold $500 million of five-and-a-half year 5% bonds. And even though this latest issue has a four-year longer maturity, some analysts still chose to gauge fair value off the existing 2016 notes that were issued earlier this year and the 2015s ($750 million 5.5% five-year) that were issued last year.
At the end of the Hong Kong trading session on Monday, the January 2016s were trading at a spread of 315bp over Treasuries. But by the time the new bonds were priced, the spread had widened to 320bp.
“It's not surprising to see them widen on the announcement,” said a source familiar with the sale.
It was believed that a new ICICI January 2016 bond would likely price at 325bp, using a 5bp new issue premium. A pure five-year bond, that would be two months shorter, would price at 320bp, which means that the final 325bp spread for the new 2020 issue implies a difference of only 5bp between the five- and 10-year part of the ICICI yield curve.
Asian and offshore US accounts each bought 42% of the deal, with the remaining 16% being sold into Europe. Fund managers took 59% of the sale, insurance accounts 14%, banks 12%, retail investors 11% and central banks 4%.
In the broader secondary market, Asia widened by 4bp to 5bp yesterday. The new ICICI bonds followed suit by opening weaker, but tightened in the late afternoon to about 320bp, which one banker referred to as a "nice controlled improvement”.
