The Hindu Business Line : Exim Bank opts for Samurai bonds to raise $200 million

EXIM Bank of India intends to raise shortly $200 million through Samurai bonds, the bank's Chairman and Managing Director, Mr T.C. Venkat Subramanian, told Business Line.

(Samurai bonds are offered in the Japanese domestic market by a non-Japanese entity.)

The bank's officials said that this would be the first Indian Samurai bond issue in 14 years.

Exim Bank has got its instrument credit-rated by Japanese Credit Rating Agency, at "one notch above investment grade", the bank officials said. The bank intends to swap the yen into US dollars.

Lower incidence of withholding tax has been cited as the major attraction for raising funds in the Japanese markets. Ten per cent tax is paid on interest payments made on overseas borrowings.

Although there is only a small saving in interest charges between a straight Libor-linked borrowing and a yen-borrowing linked to a dollar swap, the withholding tax factor makes a significant difference. The cost of the swap makes the overall cost of borrowing in yen and converting into dollars more or less equal to a straight Libor-linked loan.

However, although the costs may converge, the withholding tax is to be paid only on the interest payments — that makes the difference.

Mr Subramanian said that there was a good appetite for Samurai bond issues by government or State-owned companies in Japan as, for instance, pension funds would subscribe to them.

He said that the bank proposed to raise $400 million abroad by the end of the financial year, including the Samurai bond issue.

Officials of Exim Bank said that the Japanese market was being tapped mainly "in order to diversify our investor base".

So far, in the current year, the bank has raised $260 million. Exim Bank funds overseas buyers of Indian goods and services and Indian companies for investments abroad.

Article E-Mail :: Comment :: Syndication :: Printer Friendly Page

More Stories on : Financial Institutions

Stories in this Section
Mortgage Credit Guarantee Co, a promise yet to be honoured

LIC `group cover' business up 9 pc despite FBT

`CAR for stand-alone health insurers must be much lower'

Health insurance cost may go up

MSS bonds redemption powers market rally

Exim Bank opts for Samurai bonds to raise $200 million

Call to revitalise agri co-op banks