The biggest Private Sector bank of India ICICI Bank plans to raise $500 million through Loan through overseas resources and is in talks with four foreign banks viz DBS Bank, United Overseas Bank (Singapore), HSBC and BNP for the loans. It may be noted that the bank had already raised $500 million through a bond sale last week at 3.83%. The other features are:
- It may be priced at 120 basis points over and above the London Interbank Offered Rate (LIBOR).
- The loan is likely to be of five years maturity.
It may further be noted that the overseas loan market is easy to access and involves mainly bilateral dealings, and does not require much attention on the issuer’s ratings side. On the other hand bond sales has a wider investor base globally and thus, possesses a better brand value. Also, the bond market price is discovered in a finer way since the investors involved are across the world. A better priced dollar bond would thus provide a cheaper rate to an investor in Syndicated Loans.
The other notable points are:
- ICICI Bank had had an initial pricing of 170 basis points over the US treasure and settled at 20 basis points less due to high demand from investors.
- Moody’s assigned a Baa3 rating to the issue the lowest in the investment grading. Citigroup was the sole advisor for the deal.
- RBI has extended permission to overseas branches and subsidiaries of Indian Banks to refinance external commercial borrowings (ECBs) of Triple A rated public sector and private sector companies, which has reduced the borrowing costs and resulted in expansion of overseas credit market for local lenders.
- After the fifth bi monthly policy review, RBI has said that ECB refinancing would now be permitted to Indian banks also, which was restricted only to foreign lenders.
- ICICI has been raising funds from overseas, when the prices are reasonable, with a hope to improve its business base.