NEW DELHI, India -- Reliance Communications (RCOM) conducted its first international bond issue–raising a grand total of $300 million. “We wish to inform you that the company has launched, closed and priced the issue of Notes on April 27, 2015...The Notes will be listed on the Singapore Stock Ex Company,” the company said in a late evening release.
RCOM’s debut offshore Regulation S bond issue was dollar dominated. With a coupon rate of 6.5%, the bonds were issued with tenure of five and a half years, due in 2020. Investment bankers conducted roadshows overseas to promote the issuance. The issuance was oversubscribed three times, however, RCOM retained only $300 million.
As India’s largest telecom operator, Reliance Communications is an ancillary of the Reliance Group led by Anil Ambani –also coming out as the 15th largest mobile phone operator.
By selling bonds offshore, RCOM emerged as India’s first telecom operator to initiate the raising of funds via the offshore bond market. Out of a total of over 100 investors taking up RCOM’s bonds, a majority of the investors were from Asia; however, approximately 35% of the investors were from Europe and the UK –said a bond arranger close to RCOM with a direct knowledge of the matter of RCOM’s offshore bonds.
The securities are rated ‘BB’ by Fitch Ratings and ‘Ba3’ by Moody’s (both global rating companies). Such securities are considered to be high yield, as they fall below the investment grade. RCOM’s offshore bond venture also happens to be the third high yielding issue by an Indian company in the overseas market this year. The 5-year US Treasury bonds are currently yielding around 1.38% -suggesting that bonds have been priced after adding approximately 512 basis points (a basis point is 1/100th of a percentage point).
Moody's said that RCOM is exposed to US dollar appreciation risk since nearly two-thirds of its total debt is in dollars -against which it does not have a natural hedge, like many others in regions which depend on exports for part of their revenue. “Indian telecom operator Reliance Communications (RCOM, Ba3 stable), with about 66% of its total debt in US dollars, does not have significant mitigants in place either,“ said Moody's in a note issued last week.
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