IFR-ICICI Bank prints tightest spread among Indian banks

Last Updated: Tue, Nov 27, 2012 07:18 hrs

(IFR) - ICICI Bank (Baa2/BBB-) priced an opportunistic tap of its 2018 bonds helping it shave of 60bps off its original cost of funding and achieving the tightest pricing for an Indian bank this year.

The USD250m retap was priced at T+340bp, while the original 5.5-year bond was priced in mid August at 400bp over US Treasuries. The old bonds had widened to T+342bp-343bp after the new deal was announced from T+330bp/320bp before so the new deal printed even inside the widened secondary market level.

The bonds performed well in the secondary and were quoted at 335bp/330bp over Treasuries this morning.

The spread of T+340 was the tightest spread achieved by an Indian bank this year, beating that of Syndicate Bank which had priced a USD500m deal last month at T+355bp.

The bonds were priced at a yield of 4.066% or a reoffer price of 102.953 and the new deal brings the total outstanding for the bonds to USD1bn. The new Reg S only notes will be fungible with existing Reg S/144a notes after 40-day distribution compliance period.

The borrower has proven to be one of the savviest issuers from India in 2012, even going in for a CNH deal when conditions were ripe. This transaction also makes a bold statement that the market is open to a good quality issuer even at the tail end of the year.

In 2011 the last deal to come from an Indian issuer was in July from Indian oil corp and the market only reopened with Reliance Industries in February this year.

The deal was initially announced at a price talk of T+350bp over, a level at which the tap offered a 20bp new issue concession over the outstanding bonds. However, owing to strong demand, that premium quickly eroded when the final guidance came in at T+340-345bp.

Bankers close to the deal said it was the bank's strategy to watch the market and price a small USD750m deal first and then move in again when spreads tightened on those bonds, which obviously cuts the overall cost of those funds but also adds liquidity for investors.

This strategy also resonated well with investors and the deal saw a USD1.4bn orderbook with 140 accounts participating.

Fund managers accounted for 53% of the trade, banks and private banks went with 23%, 10% went to insurance companies, 7% to corporates and another 7% to others.

Asian investors accounted for 68% of the retap while the remaining 32% went to Europe. The original deal was in the Reg S/144 a format.

BofA Merrill Lynch, Citigroup, HSBC, JP Morgan, Standard Chartered were leads on this deal as well as the original one.

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