Business Daily from THE HINDU group of publications
Saturday, Sep 02, 2006
Business Daily from THE HINDU group of publications Saturday, Sep 02, 2006 |
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Money & Banking
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Corporate Bonds Canara Bank to raise $300 m from bonds Our Bureau
Bangalore , Sept 1 Canara Bank is tapping the foreign currency bond market to raise $300 million. The bank plans to raise the capital funds through issuance of a combination of medium term notes (MTN) and perpetual bonds. It has appointed Citi Group Global Capital Market, HSBC, ABN Amro Bank and UBS-AG as mandated lead managers to the issue. Bankers said that $200 million would be raised by way of MTN. These instruments are normally issued for tenors anywhere between five and 10 years. They added that tenors in excess of 10 years are not uncommon in the global markets. Canara Bank, according to them, intends to have its MTN with a maturity profile of 15 years, with a call option at the end of 10 years. Accordingly, the MTN would qualify as part of tier II capital.
Fine pricing
The bankers also said that pricing of the MTN is yet to be finalised. However, given the global financial markets' warming of appetite for Indian risk, the pricing is likely to be fine. Early last month, UTI Bank had raised the MTNs at 170 basis points over six month London inter-bank offered rate. Bankers said that Canara Bank's risk perception was considerably lower in view of the public sector status and its conservative banking approach. Pricing, the bankers said, was unlikely to exceed 140 basis points over six month LIBOR for the MTN issuance. Even at this rate, it is likely to be considerably cheaper than domestic funds. The six-month LIBOR is currently 5.45 per cent. Inclusive of forward premium and swap costs, pricing would still be cheaper than the domestic tier II market by about 150 basis points.
More Stories on : Corporate Bonds | Overseas Borrowings | Public Sector Banks
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