“SBI prioritised real money investors over hedge funds, closing the fundraise at $600 million. After initial price guidance at T+150 basis points, SBI attracted interest from investors for $3.5 billion,” a source told ET on the condition of anonymity. One basis point is a hundredth of a percentage point.
SBI, which accounts for nearly a fifth of the outstanding bank credit in the country, would use the funds for onward lending, said the source cited above.
The bonds were priced 117 basis points above US Treasuries of comparable maturity, which translates into a yield in the region of 5.10%, sources said. Initial guidance was for 150 bps above US Treasuries.
“The size and quality of the orderbook, the significant compression from the initial price guidance, and a tight final pricing outcome are all a testament to SBI’s robust credit metrics and strong fundamentals of the India macro story,” said Siddharth Sharma – head of financial institutions group, HSBC India, an arranger to the issue.
Bank of America, BNP Paribas, Standard Chartered Bank, MUFG and JP Morgan were involved in arranging the issue.
JP Morgan, and Standard Chartered Bank declined to comment on the matter while MUFG could not be reached for comment. Emails sent to SBI, Bank of America and BNP Paribas did not receive responses by the time of publication.SBI has stepped-up fund-raising activities in international markets at the start of the new year, having garnered $1 billion through an offshore syndicated loan and $250 million through a private placement of green notes last week.
The bank kicked off US dollar bond issuances in the current financial year through the sale of $750 million worth of senior 5-year notes at a coupon of 4.875% in late April.
That bond issuance, which was under Regulation-S, was priced at 145 basis points over comparable US Treasuries. Under the Reg-S/144A, SBI can issue securities to investors in both US and other markets without having to register with the SEC.
On Wednesday, S&P and Fitch gave ‘BBB-’ investment-grade rating on the proposed dollar-denominated bonds. The senior unsecured notes form a key segment of SBI’s $10 billion medium-term note program, according to S&P. The rating aligns with SBI’s long-term issuer credit rating (BBB-/Stable/A-3). “The bank’s ratings underscore its dominant market position and robust deposit franchise, with India’s resilient economic growth bolstering SBI’s loan expansion, asset quality, and overall profitability,” said S&P.
SBI’s recent flurry of activity in international loan and bond markets comes amid a sharp decline in US bond yields over the past month due to expectation of the Federal Reserve lowering interest rates in the coming months. Lower US interest rates makes it cheaper for domestic financial entities to raise funds in dollars.
Moreover, global investors are said to be displaying robust appetite for issuances by highly rated domestic banks among a sharp improvement in operating metrics for the sector over the past couple of years.