SBI raised $500M via a 5-year dollar bond at 88 bps over Treasuries, tightening from 120 bps guidance, as strong demand follows the RBI's swap facility.
State Bank of India, the country's largest lender, drew strong demand in its return to the public dollar bond market after nearly a year. Pricing tightened to 88 basis points over US Treasuries, sharply below initial guidance of 120 bps, three merchant bankers said Wednesday.
SBI raised $500 million through a five-year dollar bond issued via its London branch, the lender said in a stock exchange filing late Tuesday. The notes carry a 5.25% coupon, payable semi-annually.
The final spread landed broadly in line with CreditSights' expectation of 90 bps, though the research firm expects it to tighten further to around 80 bps in the secondary market. "As we had anticipated, some of this spread premium has begun to fade as supply is absorbed," CreditSights analysts said in a note. "We have an outperform recommendation on SBI."
Spreads on dollar bonds issued by Indian borrowers have widened in recent weeks on expectations of heavy supply following the Reserve Bank of India's swap concession window. Demand has been tempered by attractive rates on foreign-currency deposits.
SBI's pricing was the tightest among recent issues from Indian lenders. ICICI Bank sold notes at 100 bps, while HDFC Bank sold notes at a spread of 90 bps over Treasuries.
SBI had planned to raise $1 billion through a public dollar bond issue in June but deferred the sale due to higher borrowing costs following heavy issuance by Indian lenders. The bank subsequently raised $600 million through a private placement of three-year dollar bonds at a spread of 100 bps over the Secured Overnight Financing Rate.
The issue comes as banks line up for dollar issues after the RBI's swap facility, announced in June, made overseas borrowing cheaper. Large private lenders, including HDFC Bank, Axis Bank and ICICI Bank, have raised funds through dollar bonds in June and July.
Bankers expect SBI to tap the market again in a few weeks for raising dollars, as the board has approved raising up to $2 billion through bonds sold in dollars or any other major currency this financial year.
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