Indian Oil Corporation raised $500 million on Tuesday night through a 10-year bond offering that attracted $3.5 billion of demand, mostly from investors in Asia who are keen to deploy capital after being starved of new supply recently.
The state-owned oil and gas company followed on the heels of Korea Gas, which priced its own $500 million a day earlier. That deal drew a whopping $6 billion of orders, demonstrating to other investment-grade borrowers that it was possible to borrow at attractive long-term rates.
Indian Oil is rated, like the sovereign, at the bottom rung of investment grade and priced its bond at around 325 basis points over the 10-year US Treasury yield. The lead banks had provided price guidance around the 6% area, and tightened that to 5.75%. The notes were reoffered at par, with a maturity date of August 1, 2013.
The issue is rated Baa3 by Moody’s and BBB- by Fitch.
The order book comprised 338 accounts, with 73% of the distribution going to Asia, 25% to Europe and the Middle East, and 2% to offshore US buyers under the SEC’s Reg-S. By account type, fund managers took 64%, banks 17%, insurers and sovereign wealth funds 11% and private banks 8%.
The Indian government owns 78.92% of Indian Oil, the country’s biggest refiner, and uses the company to implement policy goals through subsidies on the retail prices of diesel, kerosene and liquefied petroleum gas. The government compensates the company for losses that result from this, but the scheme is unpredictable and clearly affects the certainty of future cash flows.
Indian Oil hired Deutsche Bank, HSBC and Standard Chartered as joint bookrunners.
