India is a step closer to breaking the record for most offshore bonds issued in a year after Adani Ports and Special Economic Zone sold $750 million-worth of US dollar bonds this week.
India’s largest port operator has been one of the country’s most frequent US dollar bond issuers in recent years, having previously tapped the market three times since 2015. This time around it was able to launch its biggest deal on the back of government support for non-bank institutions to borrow overseas.
In January, the Reserve Bank of India issued new regulations that allow all entities eligible to receive foreign direct investment under the Indian FDI Policy to borrow $750 million each financial year without having to seek regulatory approval.
The 10-year bond transaction was launched during a week of heightened global trade uncertainties that kept wary investors on the sidelines ahead of the G20 Summit this weekend.
The 10-year US Treasury yield has slipped by over 20 basis points since late last month, making US dollar bonds less appealing compared to other asset class. Still, Adani Ports has worked hard to convince investors during the marketing process, earning it an order book that was close to six times oversubscribed.
BBB-/BBB-/Baa3 rated Adani Ports revisited the offshore bond market two years after it sold a $500 million 10-year non-call five issue in June 2017, with a 10-year bullet that is 50% larger than the previous deal.
Initial guidance for the Reg S/144A deal was 240 basis points above 10-year US Treasuries, which was quoted at 2.037% during bookbuilding. It tightened slightly to 237.5bp to settle at a 4.375% coupon and a 4.412% re-offer yield on a 99.703% issue price.
At the re-offer level, the new deal was priced 30.6bp wide of the existing 2027s, which was issued at 99.128% to yield 4.106% two years ago.
Distribution statistics show that the new deal attracted $4.3 billion of demand from over 202 accounts at the re-offer level.
By investor type, fund and asset managers accounted for 76% of final orders, while insurance firms, banks and private banks took 14%, 4% and 2%, respectively. In terms of geographical spilt, Asian accounts got 40%, the US took 38% and European accounts took 22%.
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Proceeds from the bond sale will be used for capital expenditure and refinancing part of the company’s existing liabilities.
Moody’s, which assigned the same Baa3 rating to the new bond, said it expects Adani Ports’s performance to be driven by the ramping up of its capacity following the addition of new terminals to its portfolio.
The company said in March that it had become the first Indian port operator to handle 200 million metric tonnes in a day. It hopes to double this by 2025.
Barclays, Bank of America Merrill Lynch, Citigroup, DBS, Emirates NBD, JP Morgan, Mizuho Securities, MUFG and Standard Chartered were the joint lead managers and bookrunners of the new bond.
Adani Ports’s new deal is the largest US dollar bond issue from a private Indian company this year, and the third-largest behind Power Finance Corporation and Indian Oil’s offerings.
Including the new deal, Indian companies have so far raised $12.8 billion from US dollar bond sales, according to Dealogic figures. Should new deals continue to hit the market at the same pace, it is set to break 2017’s full-year record of $16.5 billion.
