The State Bank of India (SBI) on July 25 priced a US$1.25 billion bond offering, representing the first public sector bank US dollar bond issuance out of India since May 2011 and the largest single-tranche deal by a public sector bank from the country.

The Reg S/144A five-year transaction was priced at 99.140% with a coupon of 4.125% to offer a yield of 4.318%. This was equivalent to a spread of 375bp over the US treasuries, which was well inside the initial guidance of 400bp area.

The coupon at that stage was the lowest for a five-year bond from an Indian issuer, which nevertheless attracted a strong order book of more than US$6.8 billion from over 350 accounts. The bonds initially traded wider in the morning of July 26, before recovering.

This was just the third US dollar bond deal out of India this year following the US$1 billion ten-year issue from Reliance Industries and the US$500 million 5-½ year offering from Axis Bank, both priced in February.

SBI managing director and group executive Hemant Contractor was satisfied with the strong interest shown by high-quality global investors in the bank credit. “The transaction is a reflection of the standing and reputation of SBI even in a volatile global environment,” he says.

Company chairman Pratip Chaudhuri adds: “This offering underscores the confidence of the global investor community in our business and is a ringing endorsement of the faith of the global investor community in SBI in these challenging times.”

SBI held an extensive global roadshow in the previous week and held back to watch the market before launching the transaction.

In terms of geographical distribution, 47% of the bonds were sold in Asia, 31% in the US and 22% in Europe. By type of investors, asset and fund managers accounted for 49%, private banks 24%, banks 12%, insurance companies 12% and public companies 3%.

Bank of America Merrill Lynch, Barclays, Citi, Deutsche Bank, J.P. Morgan and UBS were the joint lead managers for the transaction.
In another deal, the Export Import Bank of India priced on July 31 a US$500 million deal that attracted US$2.5 billion in demand. The five-year offering was priced at 99.365% with a coupon of 4% to offer a yield of 4.142% – equivalent to a spread of 355bp over the US treasuries.

In terms of geographical distribution, 52% of the bonds were allocated in Asia, 36% in Europe and 12% in offshore US.  Asset managers took 48% of the paper, private banks 21%, banks 19%, insurance companies 11% and others 1%.

Citi and Standard Chartered were the joint bookrunners for the transaction. – CS