REC Ltd. Successfully Raises 3 Yr USD 500 Mn Bonds, First USD Cross Border Issuance Out of India since COVID-19

New Delhi, 15 May 2020: REC Limited, a Government of India PSU and one of India’s largest power financiers, opened up the USD markets for Indian issuers in the wake of COVID crisis. In the lead up to the issuance, REC was actively monitoring markets, waiting patiently for an opportune window. With the global lockdown fears receding somewhat and liquidity coming back to the Asian markets, on 12th May 2020, REC pulled the trigger and tapped the offshore debt markets, making it the first issuer from India since 5th March 2020.

The paper was strongly received by investors, with books rapidly crossing USD 2 bn across Asia and Europe. US investors too came in strongly, with REC finally receiving subscription of more than 5 times of the actual issue size, through 175 investors. The strong investor demand saw the issuance being upsized from the base size of 300m to 500m. The 3 year issuance was priced at a coupon of 4.75%.

The REC paper saw demand from high quality long term investors and large global fund houses. Asia took the largest allocation at 68%, Europe Middle East & Africa (EMEA) 19% and US at 13%. In terms of investor type, Fund Managers were allocated 52%, Insurance/PF 23%, Banks 16% and Private Banks 9%. Given the high demand, the issuance priced at nil New Issue Premium (NIP), comparing favorably to other global bond issuers who have had to pay significantly more NIP in recent deals.

Being the first issuance from Indian post outbreak of COVID pandemic, this provides an impetus to a large number of Indian issuers who have not been able to access offshore markets in recent times.

Mr Ajeet Kumal Agarwal, Chairman and Managing Director, REC Limited said “With this benchmark issuance, REC has effectively opened up the offshore debt market for other Indian credits to tap into. The strong reception to this deal demonstrates both the resilience of the Indian economy among International investors and the high regard for REC’s credit quality”

Barclays, HSBC, MUFG Securities and Standard Chartered acted as Joint Lead Managers and Book runners to the transaction.

Key Highlights

  • REC successfully raised 3 Yr USD 500 Mn Bonds from 144A market on May 12, 2020 at a coupon of 4.75%, under its USD 7 Billion GMTN Programme.
  • First USD cross border issuance out of India since COVID-19 (since 5th Mar’20)
  • Final Order books over-subscription of 5 times enabled transaction up-size from US$ 300mn to US$ 500mn
  • 175 quality investors participated, with allocation to Asia 68%; EMEA 19% and US 13%
  • Given the high demand, the issuance priced at NIL New Issue Premium (NIP), comparing favourably to other global bond issuers who have had to pay significantly more NIP in recent deals