India's largest private integrated telecoms operator Bharti Airtel on March 4 debuted on the international public bond market as it priced a US$1 billion offering that generated huge investor demand. This was the largest ever single tranche international bond deal issued by an Asian telco, outside of Japan, since 2011 and the first ever cross-over credit out of India to access the international bond markets.

The Reg S/144A 10-year deal was priced at par with a similar coupon and yield of 5.125%, or equivalent to a spread of 324.8bp over the US treasuries. This was well inside the initial price guidance of 5.50% area and was at the tight end of the final guidance of 5.25% area (+/- 12.5bp). The bonds performed solidly in the secondary market and were quoted at 101.

Taking advantage of the supply lull in the Asian bond markets in February, Bharti undertook a global roadshow to meet investors in Singapore, Hong Kong, New York, Boston and London during the week of February 25. The exercise generated warm reception as the company engaged 80 accounts through a combination of face-to-face meetings and private conference calls.

The strong momentum gained throughout the roadshow culminated in significant indications of interest, allowing the arrangers to announce the deal on March 4 as the Asian market opened with an initial price guidance of 5.50% area. The transaction was met with strong demand from Asian accounts and the order book was covered within the first hour of bookbuilding.

The significant investor interest continued into the London open, allowing the arrangers to announce a final guidance of 5.25% area (+/- 12.5bp). The issue was capped at US$1 billion and deal was finally priced at par to yield 5.125% at re-offer.

The final order book amounted to over US$9.5 billion from 421 accounts with 37% of the bonds allocated in Asia, 33% in the US and 30% in Europe. By type of investors, fund managers bought 67%, private banks 19%, banks 8%, and insurance companies and other corporates 6%.

The proceeds from the bond offering, issued through Bharti Airtel International (Netherlands), will be used for the repayment and refinancing of existing foreign currency debts, as well as for general corporate purposes.

The deal features key covenants on limitation on indebtedness, liens, consolidation, merger and sale of assets.

Barclays, BNP Paribas, Citi, Deutsche Bank, HSBC, Standard Chartered and UBS were the joint bookrunners for the transaction.

As at the end of 2012, Bharti served an aggregate of 262.3 million customers, offering an integrated suite of telecom solutions, including mobile and fixed line services, long distance connectivity and broadband services, both local and overseas.

According to Fitch Ratings, the company as of end-2012 had total debt of US$13.6 billion, and cash and equivalents of US$1.9 billion. Of its total debt, only 19% was secured and 63% was denominated in US dollar. Also, about 91% of the total debt was floating rate, leaving the company exposed to interest rate increases. Fitch says a 100bp increase in the interest rate on its US dollar borrowings will increase its interest costs by about US$85 million to US$90 million.