State Bank of India (SBI), the largest lender in India, is planning to raise up to $750 million in overseas bonds. The bond sale is being arranged by JP Morgan, BoFA Securities, Standard Chartered Bank, and HSBC.
The bonds will be benchmarked against 5-year US Treasury bonds and are likely to be priced at a spread of 140-145 basis points over the benchmark. The bond will have a tenor of 5 years.
The proceeds from the bond sale will be used for lending and other debt purposes. SBI has a $600 million of bonds maturing this month and $800 million worth of instruments maturing early 2024.
What are these bonds?
The overseas bonds that SBI is planning to raise are debt securities issued by the bank in foreign currency, in this case, US dollars. These bonds are typically issued to international investors and are subject to foreign exchange risk.
Overseas bonds can be a way for companies to raise capital in foreign currency, which can be useful if they have foreign operations or if they want to hedge against currency fluctuations. However, overseas bonds also carry more risk than domestic bonds, as they are subject to the laws and regulations of the foreign country in which they are issued.
In the case of SBI, the overseas bonds will be issued in the US market. This is because the US market is the largest and most liquid bond market in the world, which means that SBI will be able to raise funds at attractive terms.
The proceeds from the overseas bonds will be used by SBI to meet its capital requirements and continue to lend to businesses and individuals. The bond sale is a positive development for SBI, as it shows that the bank is able to raise funds at attractive terms in the overseas markets.
Here are some additional details about the bond sale:
- The bonds will be issued in US dollars.
- The bonds will have a tenor of 5 years.
- The bonds will be priced at a spread of 140-145 basis points over the benchmark.
- The proceeds from the bond sale will be used for lending and other debt purposes.
This is the second time this year that SBI has tapped the overseas markets for funds. In April, the bank raised $750 million through 5-year Regulation S (Reg S) bonds at a coupon of 4.875%.
The bond sale is part of SBI’s broader capital-enhancement exercise. The bank has been under pressure from the government to raise capital in order to meet Basel III norms.
The bond sale is expected to open as early as next week, coinciding with the start of the two-month-long autumnal festive season during which demand for retail credit is the highest in India.
