Reliance Communications sold a maiden $300 million 5.5-year bond late on Monday, pricing India’s first high-yield corporate bond in almost two months.
Rated Ba3/BB-, the Reg S-only offering priced at 6.5%, around its initial price guidance area, according to a term sheet seen by FinanceAsia.
Orderbooks reached $650 million from 100 over accounts, with Asian investors subscribing to 75% of the notes, according to a source familiar with the matter. The paper, however, relied heavily of private banks and retail participation, which accounted for 67% of it.
The Mumbai-based telecommunications firm’s latest offering comes shortly after the completion of its global roadshow which began in Asia and Europe on April 20.
The issuer is also returning to international bond markets after pulling its debut $255 million five-year non-call three Reg S offering in December, which was marketed at a yield of 5%. At that time, the bonds and the company were unrated.
India, expected to be the third-pillar of Asia’s high-yield market, has gotten off to a slow start despite fixed income experts’ bullish predictions for the sector this year.
Standard & Poor’s in a report earlier this year said cross-border bond issuance by Indian companies could boom in 2015 and beyond, providing the New Delhi government introduces key market reforms.
Indian annual cross-border debt issuance could test the $25 billion mark over the next few years, the credit rating agency said.
But a few headwinds have whipped up in the last few months to slow the supply of new Indian debt and push back foreign investor interest.
The latest is the threat that foreign bondholders could face a bill of up to $8 billion in new and retrospective taxes, potentially reversing Prime Minister Narendra Modi’s previous efforts to attract overseas investment into the nation’s fixed income market.
The other bedbug is a circular announced by the Reserve Bank of India in November that effectively outlawed a new structure, pioneered by Greenko Group, which promised to open up the offshore bond market to a wider range of lower-rated and higher-yielding Indian names.
The last Indian corporate to issue a high-yield offering was local property firm Lodha Developers, which sold a maiden $200 million five-year bond that’s callable in year three on March 6.
There were $10.9 billion-worth of Indian corporate dollar-, euro- and yen-denominated deals raised in 2014, up 42% from the previous year’s total volume, according to Dealogic data.
Comparables
The nearest comparables for Reliance Communications’s bond include its sub-sea cable subsidiary B+ rated Global Cloud Xchange’s outstanding 2019 bonds that traded at a cash price of 101.852, or a yield of 6.491%, in afternoon Asian trade on Monday, according to Bloomberg bond data.
This translates into an adjusted yield of 6.52% if GCX were to issue a new bond, said a source close to the deal.
The proceeds raised from Reliance Communications's bond would be used for capital expenditure or any other permissible end-use as prescribed by the RBI, Reliance Communications said in its prospectus.
In an April 17 report, Fitch said that the company will use part of the proceeds to fund the $173 million upfront payment for spectrum -- a range of radio frequencies -- that it won at auction in March.
The company is part of the Anil Dhirubhai Ambani-owned Reliance Group, one of India's largest business groups in terms of market capitalisation. Its operations also include infrastructure, power, financial services, and entertainment.
DBS and Standard Chartered are the joint bookrunners on Reliance Communications’s transaction.
CLP Holdings
Elsewhere, Hong Kong-based CLP Power sold a $300 million 10-year bond, the first utilities company to raise a dollar-denominated bond in Asia this year, according to Bloomberg bond data.
Rated A1/A, the power company priced the Reg S-only bond at US Treasuries plus 125 basis points, which is 20bp tighter than its initial price guidance of around 145bp, according to a term sheet seen by FinanceAsia.
Orderbooks reached $2.8 billion from 200 accounts, mainly from Asian investors (78%). Fund managers purchased 55% of the notes, followed by banks 24%, insurance and pension funds 17% and private banks 4%.
CLP has two outstanding $300 million bonds maturing in 2023 and 2027, respectively, that traded at Treasuries plus 131.7bp and 152.1bp in early Asian trade.
This time last year, CLP sold a $500 million perpetual bond that is callable in year 5.5.
ANZ, Credit Agricole, HSBC, Mizuho Securities and Standard Chartered are the joint book runners of the transaction.
