Delhi International Airport Ltd (DIAL) had a measure of success and failure when it returned to the bond market this week, raising $522.6 million from a market-opening 144A bond — but failing to pull off a debut masala issue.
The airport operator had planned to sell a 10 year US dollar bond and a seven year masala bond, a rupee-denominated bond sold outside of India. But after failing to get enough demand from investors for the masala tranche, it jettisoned that part of the plan.
The pulled tranche was a rare setback for the masala bond market, which has slowly been building momentum since International Finance Corporation sold the first issue in 2013. Housing Development Finance Corporation opened masala bonds to Indian issuers earlier this year and since then, the market has featured its first green bond. But DIAL's attempt to add some high yield flavour to the market appeared a step too far.
The Ba1/BB rated issuer had marketed a seven-year masala bond at pricing of around “the 9.75% area”.
Bankers close to the deal defended the cancellation of the masala tranche, arguing that DIAL “did not need the money” after getting sufficient demand in the 144a market. But the reliance on the US dollar issue leaves DIAL being forced to bear the costs of swapping the proceeds, since the money will be used to pay off rupee-denominated debt.
Better off in dollars
DIAL certainly achieved success in the US market, however, becoming the first Indian infrastructure company to print a bond in the 144A market, according to a debt banker.
The issuer raised $522.6 million from the 10 year bond, which has potentially opened up a new source of funding for India's high yield credits. The deal ended up pricing to yield 6.125%, at the tight-end of final price guidance.
The closest comparable was the company's own $288.75 million Feb 2022 bond, which it sold last January. That note was trading at 4.613% on a yield-to-maturity basis, equivalent to a G-spread of 332bp.
Bankers close to the deal said that, after accounting for the five-year curve extension with between 100bp and 125bp extra yield, the company only had to pay a minimal new-issue premium to open the market.
In a bid to secure enough demand for its first 144A offering, the company held a week-long roadshow with global investors across the US, as well as in London, Hong Kong and Singapore.
The issuer initially went out with a price guidance of "the 6.5% area", before tightening it to 12.5bp each side of 6.25%. Final pricing of the October 2026 deal was fixed at 6.125%, according to a term sheet seen by FinanceAsia.
The final order book closed at $3.4 billion across 219 accounts. US investors took 42%, Asian accounts 35% and European and Middle Eastern buyers 23%. By investor type, asset managers and insurers took 83%, private banks 15% and banks 2%.
The joint global coordinators were Citi and Standard Chartered, while Axis Bank, Deutsche Bank, Goldman Sachs, HSBC, JP Morgan and MUFG were joint bookrunners.
