SBI hits overseas debt market with $500 mn 5-year bond sale

SBI hits overseas debt market with $500 mn 5-year bond sale
The nation's largest lender State Bank of India has hit the international debt market with a benchmark issue to raise around USD 500 million as part of its USD 10-billion medium-term notes programme through a five- year dollar money sale. "The SBI is in the international debt market with a benchmark issue to raise around USD 500 million in US dollar denominated bonds. The money will be raised through its London branch and will be listed on the Singapore Exchange," two investment banking sources told PTI here today.

When contacted State Bank refused to comment citing confidentiality clause as the market moving nature of the information. All the three international rating agencies have accorded investment grade ratings to the proposed USD 500 million bond sale by the country's largest lender SBI which has been away from the overseas debt market for some time now.

SBI last raised overseas debt by issuing dollar denominated notes worth USD 300 million last September and prior to that in February 2014, it had raised USD1.25 billion in another dollar money sale. The bank has so far raised USD 3.5 billion out of its USD 10 billion MTN programme, including USD 400 million in perpetual bonds. The bank had also concluded AT1 Basel III- compliant non-convertible, perpetual non-call five-year subordinated, unsecured notes at a coupon 5.5 per cent payable semi-annually under USD 10 billion RegS bond programme.

Moody's has assigned a Baa3 rating to the senior unsecured notes, issued under its USD 10-billion MTN programme. The drawdown will be carried out from its London branch, and the bonds will be listed on the Singapore Stock Exchange, Moody's said in a statement. Fitch has also assigned 'BBB-' ratings to the programme that constitutes direct, unconditional, unsubordinated and unsecured obligations of the issuer.

"The issue will at all times rank pari-passu among themselves and with all other unsubordinated and unsecured obligations of State Bank," Fitch said, adding the tenor of the issue is expected to be around five years. S&P too assigned 'BBB-' long-term issue rating in line with the sovereign rating, to the proposed issue of SBI's senior unsecured notes. The rating on the notes reflects the long-term counterparty credit rating on SBI, S&P said.

According to Moody's, SBI's final Baa3 rating incorporates a one-notch uplift due to its assumption of the bank's very high level of support from the government in a stressed situation. The assumption of high government support is based on a combination of SBI's large size and the critical role it plays in the country's banking system, representing around 16.3 per cent of system loans and 17.6 per cent of system deposits as of March 2016, its nationwide reach, and the government's 60.18 per cent ownership in the lender.

Fitch said post this issue, SBI's core capitalisation is set to improve in the year to March 2017 from a core equity tier 1 ratio of 10.3 per cent in September 2016. Fitch said the bank is likely to receive around USD 835 million in new capital from the government shortly out of the total USD 1.1 billion earmarked for this fiscal, which is around 5 per cent of its 2015-16 equity and has plans to raise an additional USD 2.2 billion directly from the market, for which it has received shareholder approvals.
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