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Bharti Airtel prints largest ever Indian corporate bond
Chito Santiago 1 Jun 2014

Bharti Airtel, a leading global telecoms company, on May 12 priced a dual-currency bond offering totaling US$2 billion equivalent in the largest ever bond transaction by an Indian issuer. This is also the first ever dual-currency bond deal by an Indian corporate.

The Reg S/144A deal comprised of US$1 billion for 10 years, which was priced at 99.916% with a coupon of 5.35% to offer a yield of 5.361%. This was equivalent to a spread of 270bp over the US treasuries, or at the tight end of the final price guidance of 275bp area (+/- 5bp).

The other tranche was for 750 million euro (US$1.04 billion) for seven years and was priced at 99.248% with a coupon of 3.375% to offer a yield of 3.498%. This represented a spread of 225bp over mid-swaps, also at the low end of the final guidance of between 225bp and 230bp.

The arrangers adopted a two-stage approach in launching the transaction, announcing the US dollar tranche first at the Asia open on May 12 and the euro tranche at the London open later in the day. The US dollar tranche was announced at 10.30am Hong Kong time with an initial price guidance of 300bp area over the US treasuries. An investor call was likewise arranged to update the accounts and address any concerns.

At the London open, during which the US dollar tranche has already attracted an order book of US$2.9 billion, the arrangers released the initial price guidance for the euro tranche at 245bp area over mid-swaps. It immediately gained a strong traction among investors with the demand amounting to 4.5 billion euro within just two hours of bookbuilding.

At the Asia close, the final price guidance was released at 275bp area (+/- 5bp) for the US dollar tranche and between 225bp and 230bp over mid-swaps for the euro tranche, with the books at that time amounting to US$5.7 billion and 4.5 billion euro, respectively. Subsequently, robust interest was received from the US real money accounts pushing the order book for the US dollar tranche to over US$9 billion.

With the US dollar tranche and the euro tranche being priced 30bp and 20bp inside their initial guidance, Bharti was able to achieve its price targets. Before the deal announcement, its outstanding US$1.5 billion 5.125% March 2023 bonds were trading at 250bp over the US treasuries or a G-spread of 268bp.

The US$9.5 billion worth of demand for the US dollar tranche came from 550 accounts with 51% of the bonds eventually allocated in the US, 30% in Europe and 19% in Asia. Fund managers were the biggest buyers as they accounted for 75%, followed by insurance companies with 11%, banks 6%, private banks 3% and other investors 5%.

The euro tranche garnered total orders in excess of €4.75 billion from over 400 accounts. In terms of geographic distribution, 44% was sold in the UK, 21% in Germany and Austria, 10% in France, 7% in Benelux, 5% in Switzerland, 4% in Asia and 9% in other markets. By type of investors, fund managers bought 76%, insurance companies and pension funds 13%, banks and private banks 10% and other investors 1%.

Proceeds from the transaction, issued through Bharti Airtel International (Netherlands) and guaranteed by Bharti Airtel, will be used to refinance Bharti's existing foreign currency debts and for general corporate purposes. Bank of America Merrill Lynch, Barclays, BNP Paribas, HSBC, J.P. Morgan and Standard Chartered were the joint bookrunners for the transaction.

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