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The country’s largest private sector lender ICICI Bank on Monday said it will upsize the issuance of dollar-denominated senior unsecured notes by $200 million (about Rs 1,200 crore) for five-and-half-year maturity.
The upsized tap offering has the same terms and conditions as the existing notes, which will be consolidated with the bank's existing $500 million 3.50 per cent notes due 2020, 176 basis points over and above the US 5-year bond.
Moody's Investors Service has maintained its Baa2 rating on the dollar-denominated senior unsecured notes. Standard and Poor’s also maintained its 'BBB-' long-term issue rating for the Dubai Branch's notes, following the announcement of a tap bond offering on its existing $500 million notes issued in September 2014.
An ICICI Bank spokesperson declined to comment.
“The bank received a coupon rate which was better than the previous 3.50 per cent,” a person in the know of the development said.
The ICICI Bank's reopening was indicated to be at 3.35 per cent, about 167 basis points over the 5-year US Bonds
The ‘BAA2’ senior unsecured debt rating is anchored on ICICI Bank's ‘BAA3’ baseline credit assessment (BCA) and the high likelihood of systemic support in the event of a crisis. The ‘BAA2’ rating is at the same level as the foreign currency debt ceiling for India.
Moody’s said, “ICICI Bank's BCA is underpinned by the bank's solid franchise as India's largest private sector bank by assets, as well as its strong capitalisation, liquidity, and earnings profile.
It also takes into consideration, among others, the bank's high borrower concentration in the form of its mandatory Government securities portfolio; its improving but still weak asset quality when compared to its global peers; and the challenging domestic operating environment.
The notes will constitute direct, unconditional, unsecured, and unsubordinated obligations of ICICI Bank. They shall at all times rank at par among themselves and with all other unsecured obligations of the bank. The rating on the notes is subject to our review of the final issuance documentation, S&P said.
Tight spread
Reuters adds: According to a banker, the $200 million raised by ICICI in an opportunistic tap of its $500-million 3.5% March 2020s at 165bp over Treasuries was the tightest spread for an Indian bank deal since 2007.
The issue broke the record of Axis Bank, which sold $500 million of 3.25% 2020 bonds last month priced at 170bp over Treasuries.
While investors have turned a tad cautious over the country's high-yield sector due to complicated structures and more restrictive RBI guidelines for foreign borrowings, the appetite for quality investment-grade names out of the country remains robust, investors say.
With a further boost from the strong November non-farm payroll growth in the US, the largest private-sector lender decided to do the opportunistic tap, which raised the total outstanding on the existing issue to $700 million.
The tap offered a negligible new-issue premium as its existing 2020s were indicated at 163bp over Treasuries prior to the reopening. The tap came with a lower all-in yield of 3.356%, versus a yield 3.57% on the existing notes.
The leads also referenced Axis Bank's 2020s, quoted at G-spread of 169bp. Yet, the ICICI tap priced through that on the back of strong demand from investors outside Asia.
Axis Bank's stressed asset ratio as of September 30 stood at 4 per cent, compared with 6 per cent for ICICI.
The distribution of the Reg S tap, with ICICI's Dubai branch as the issuer, defied the typical 70/30 split between investors from Asia and elsewhere for Asian deals. West Asian investors showed enormous appetite for ICICI, buying 39 per cent of the notes. European investors also bought an impressive 32 per cent, while Asia took the remainder.
"The distribution speaks volumes about how well-known ICICI is among global investors," said a banker on the deal. "That's why the tap went for a Reg S-only format versus the 144A/Reg S format for the initial issue."
Meanwhile, the country's private-sector banks were likely to lead the improvement on asset quality in the near future, said Nomura.
Against a narrowing fiscal deficit, declining inflation and rising GDP growth in India, "we expect the asset quality cycle to bottom out over the next two to three quarters, led by private sector banks and large public sector banks," analysts at Nomura wrote in a research note on December 5.
The analysts, however, expects the recovery to be gradual during 2015-2016 with Indian banking system's non-performing loans ratio and total stressed assets ratio to remain largely unchanged at around mid-4% and 10-11 per cent, respectively.
The ICICI reopening was indicated a tad wider at bid-167 over Treasuries.
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