Indian telco Bharti Airtel, controlled by billionaire Sunil Mittal, printed a $1 billion debut bond early Tuesday morning, attracting strong investor interest amid a dearth of paper in the telecoms sector.
“Bharti attracted the most investors I have seen for an Indian company in the last two years,” said a banker. “The investor meetings were packed to the gills.”
Investors like the telco sector for its defensive qualities, but, aside from a handful of Asian names such as Indosat, Singapore Telecommunications, PCCW and Optus, there are few bonds.
Bharti’s deal was the biggest single-tranche international bond issued by a telco in Asia, excluding Japan, since 2001. It is a crossover credit, rated BB+ by Standard & Poor’s and BBB- by Fitch.
The company first conducted roadshows back in June 2011 but did not make it to market, as conditions deteriorated that month amid renewed investor fears of a European sovereign debt default.
The bonds were issued by Bharti Airtel International (Netherlands), the same entity that paid $9 billion for Zain Africa back in June 2010. The proceeds from the bond issue will partly go towards refinancing that acquisition loan.
Bharti had obtained the loan to finance Zain at competitive rates — with pricing said to be Libor plus 195bp for a five-year amortising loan. Its latest 10-year bond priced at a spread of Treasuries plus 324.8bp, though it has a bullet structure, allowing Bharti to lengthen its maturity profile.
The initial guidance was in the area of 5.5% and this was revised to 5.125% to 5.375%, with the bonds printing at the tight end. The bonds traded higher and were quoted at 101/101.5 on Tuesday afternoon, over a point above the par issue price.
The comparables for Bharti included Indosat, though it is one-third the size of Bharti in terms of Ebitda (earnings before interest, tax, depreciation and amortisation). Other comparables in the telco sector were Singapore Telecommunications (which holds a 15.6% stake in Bharti, but is more highly rated) and MTS in Russia.
The final order book stood at more than $9.5 billion from 421 accounts. Asian investors were allocated 37%, Europe 30% and US accounts 33%. By investor type, funds took 67%, private banks 19%, banks 8% and insurers and companies took the remaining 6%.
Having completed its debut bond, bankers expect Bharti Airtel to continue to tap the bond market on an opportunistic basis and the company hinted that it would return to the market.
“We are extremely pleased with the strong interest shown globally by top global investors in Bharti’s inaugural bond issue,” said Harjeet Kohli, group treasurer at Bharti in a release. “Diversifying its investor base, this transaction opens the door for Bharti to have an ongoing relationship with global investors in a deep corporate debt market.”
Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, Standard Chartered and UBS were joint bookrunners.
