ICICI Bank sold a $500 million 5.5-year bond on Thursday, pricing it tighter than its own funding curve and those of its competitors as global investors continue to buy the Indian story.
The 144A/Reg-S offering, the first new Indian dollar-denominated bank deal in four months, priced at Treasuries plus 180bp, which is 20bp tighter than its initial price offering of Treasuries plus 200bp area, according to a term sheet seen by FinanceAsia.
The closest comparables for the note were ICICI’s existing five-year bonds expiring in 2019 — issued earlier this year — that were trading at a G-spread of 174bp, according to a source close to the deal. After taking into consideration a six-month extension, fair value for the bond would be about 186bp to 187bp, suggesting that the offering priced 6bp to 7bp tighter.
The State Bank of India also had outstanding notes that were trading around the same fair value as well, added the source. ICICI’s bond has a coupon of 3.5% and a yield of 3.57%.
“ICICI was very opportunistic and maximised the global distribution, particularly the strong bids from the US,” said the source, who added that timing was perfect as ICICI’s deal came two days after strong pipeline buildup post-Hong Kong’s public holiday on Tuesday.
On Wednesday, Asia ex-Japan’s debt capital markets saw two deals pricing. The Hong Kong government priced its first $1 billion five-year sukuk while Chinese asset management firm China Great Wall sold a $500 million three-year bond.
Syndicate Bank was the last Indian financial institution to raise a dollar-denominated bond. The bank raised a $400 million 5.5-year bond in May.
European investors
ICICI’s latest offering was more than four times oversubscribed, obtaining an order book of $2 billion from 190 accounts. The geography breakdown was relatively equal, with 39% of the paper going to European investors, 34% to US investors and the rest to Asia.
European investors were particularly keen to hold ICICI’s notes, with many of them being cross-over investors — fund managers that are not only committed to emerging market names — a source familiar with the matter said.
Funds and asset managers subscribed to 66% of the notes, followed by financial institutions with 21%, insurance and pension funds with 10% and private banks with 3%.
Syndicate bankers said the reason for global investors pouring billions of dollars not only into Indian equities but into debt was fairly simple. The combination of a stable political regime has pushed down credit spreads, with Indian bank dollar-denominated paper now a staggering 120bp since the beginning of the year.
“With financial market sentiment towards India still positive and the first Indian US dollar supply post an issuance drought often a positive catalyst, we expect this deal to perform…,” said Mark Reade, Asian fixed-income trader at Mizuho Securities.
In secondary markets, ICICI’s new offering is trading 2bp tighter at Treasuries plus 178bp, according to Bloomberg bond data.
The Bharatiya Janata Party swept to power in a May election with the biggest mandate for an Indian party in 30 years, ridding the nation of political uncertainty and restoring confidence in its capital markets.
As of September 10, Indian G3 bond issuance has reached $13.4 billion for the year, which is 27.6% higher than last year’s volume of $10.5 billion during the same period, according to Dealogic data.
Bank of America Merrill Lynch, Citi, Deutsche Bank and HSBC were the joint bookrunners of the Baa2/BBB- rated transaction.
