ICICI Bank prices $1 billion debt at tighter spread

ICICI Bank has priced a $1 billion five-year dollar bond at a much tighter spread than ​initially indicated, in the largest such issue by an Indian lender in ‌nearly 14 years, three bankers said.

The bank set the ​coupon at 100 basis points over U.S. Treasuries, sharply ⁠lower than the initial guidance of 130 basis points, for its first dollar debt sale in nearly nine years. The coupon works out to be ‌5.46%.

The offering attracted $3 billion in bids against a base issue size of $500 million, the bankers said, speaking on condition ‌of anonymity because they were not authorised to speak to ‌the ⁠media.

ICICI Bank did not immediately respond to a ⁠Reuters request for comment.

The deal is the largest dollar bond sale by an Indian private-sector bank, and the second biggest by any local lender since State Bank of ​India’s $1.25 billion five-year issue ‌in January 2013.

The private bank becomes the latest to leverage the central bank’s lower-cost hedging facility, after the Reserve Bank of India last month introduced a swap facility allowing eligible external commercial borrowings ‌by banks and state-owned companies to be hedged at a ​fixed rate of 1.5% per annum, compounded semi-annually.

The measure significantly lowers hedging costs, making overseas dollar fundraising more ⁠attractive.

CreditSights had projected the bond to be priced at a spread of 95-100 bps, but places the fair value at 85 bps.

Analysts ‌Lim Ze Hao and Pramod Shenoi said ICICI Bank’s bonds were fairly valued at broadly flat to HDFC Bank’s debt and around 10 bps tighter than State Bank of India’s four-year dollar bonds after accounting for duration premium.

In June, HDFC Bank had raised $750 million through a five-year dollar debt sale at a spread of ‌92 bps over Treasuries. In the secondary market, it was traded at ​a spread of 94 bps.

Another private sector peer Axis Bank had raised an aggregate of $800 million through a dual-tranche ⁠dollar bond issue in June.

The proceeds from ICICI Bank’s issue will be ⁠used for general corporate purposes. The bonds are expected to be rated “Baa3” by Moody’s and “BBB” by S&P Global, in ‌line with the issuer.

In December 2017, ICICI Bank had raised $500 million through 10-year bonds at a coupon of 3.80%.

CreditSights has ​also upgraded its recommendation on these bonds to “outperform” from “market perform” earlier.