The bond sale would be known as Regulation S in market parlance, whereby bonds are offered to investors outside the US.
ET Bureau | Mar 27, 2019, 10.44 PM IST
State-owned Bank of Baroda is set to raise up to $1 billion by selling bonds overseas to solidify its capital position ahead of a likely jump in credit demand. The bank has just concluded roadshows across the world, three people familiar with the matter told ET.
The bond sale would be known as Regulation S in market parlance, whereby bonds are offered to investors outside the US. The bond sale is likely to open for subscription before this financial year comes to a close on March 31, the sources said.
“The proceeds would be deployed to expand credit in the new financial year while some parts may also be used to refinance amid falling US Treasury yields,” one of them said.
BoB confirmed the matter in an email response to ET, saying it is raising “US $-denominated senior unsecured notes offering with a tenor of up to 5.5 years”.
The people cited earlier said the bank is considering a few sets of maturities including three years and five years to raise between $500 million and $1 billion.
Initial price guidance suggests three-year bond may be priced after adding 140-150 basis points over and above similar maturity US Treasury yield. The differential is 170-180 basis points when it comes to the five-year paper.
“The bank looks comfortable with such price guidance while investors apparently offered to subscribe them at those level,” said one of the sources.
JP Morgan, MUFG, Barclays, DBS, Standard Chartered are some of the banks helping the issuer to raise the money. Individual bankers could not be contacted immediately for comments.
The fund raising should also help BoB meet regulatory requirements with the merger of Vijaya Bank and Dena Bank, an event that will come into effect beginning April 1.
“The roadshows commenced on March 26, 2019 in Singapore, Hong Kong, Dubai, Abu Dhabi and London,” a BoB spokesperson said.
P S Jayakumar, managing director of the bank, attended the London roadshow while two other executive directors participated in other countries.
Such dollar bonds to be issued by the government-owned bank would be rated with investment grade in line with India’s sovereign rating grade.
Fitch Ratings has assigned an expected rating of ‘BBB-(EXP)’ to Bank of Baroda’s proposed senior unsecured notes, which will be issued by the bank’s London branch, the global rating company had said in a release on Monday.
The proposed notes will constitute the bank’s direct, unconditional, unsubordinated and unsecured obligations and will at all times rank pari passu among themselves and with all of the bank’s other unsubordinated and unsecured obligations, it said.
In the past six months, Bank of Baroda shares surged more than 16% on the BSE amid signs of improving asset quality.