SBI to raise $2b via bonds in US.

State Bank of India (SBI) plans to mobilise up to $2 billion (about Rs 9,402 crore) through a maiden bond issue in the US, staying away from the volatile European market. The bonds will be targeted at institutional investors.

This will be outside its on-going $5 billion medium-term note (MTN) programme. The bank has already mobilised $2.9 billion in the programme.

In an oral response to an e-mailed questionnaire, SBI confirmed the bond issue plan. It said it was yet to appoint a lead arranger to the issue, though most leading foreign banks had made presentations to it in a bid to take up the job. The issue is expected to hit the market next month.

The bank expects the paper to attract US fund houses, pension funds and other institutional investors.

The bonds will be issued under Rule 144A, which does not require the issuing firm to file a public registration statement with the Securities & Exchange Commission, the federal agency that regulates the securities and public debt market in the US.

Since it is not classified as public debt, the disclosure norms are less stringent and can only be sold to qualified financial institutions. The perceived risks in these bonds are higher due to the limited disclosures but yields are generally higher.

“We are yet to decide on the yield but we will keep ourselves competitive,” said a senior SBI official.

The money so raised will be used to finance the bank’s expansion in Europe, the US, South-East Asia and Africa. SBI is also looking at acquisitions for inorganic growth in South-East Asia and Africa.

SBI is unlikely to raise any more money through the MTN route now as the European markets are volatile and expected to remain so for a while.

In several tranches of this fund-raising exercise, the bank has already mopped up $2.9 billion. It still has headroom to raise another $2.1 billion.

Last October SBI raised $750 million (about Rs 3,600 crore) through five-year bonds carrying a coupon rate of 4.5 per cent.

An MTN programme allows an issuing firm to raise funds on an on-going basis through various products such as floating-rate notes or fixed-rate bonds after regulatory and other approvals.

Source :- mydigitalfc.com