Editor’s Note: The following story was originally published in the evening on Dec. 11, and has been reissued during regular business hours to reach a wider audience.
Shriram Finance Ltd., one of the largest retail-focused non-bank finance companies in India, is looking to raise about $300 million to $500 million through a covered USD-denominated senior secured bonds with a final maturity of 6.5 years and a weighted average life of 3.5 years, issued by an orphan special purpose vehicle, or SPV, two sources familiar with the matter said.
The company plans to launch the bond in mid-January and is targeting an overall blended cost of 9.25% in INR terms, roughly the same cost level in the domestic bond market for the firm, the sources said.
International Finance Corporation, or IFC, is likely to purchase up to $150 million of the bonds subject to internal approval, the sources said. The final issue size will depend on demand from fixed income investors and pricing, sources said, adding that the company started talks with fixed income investors today, Dec. 11. The company will meet investors from Singapore and Hong Kong on Dec. 14 and those from the United States and Europe from Dec. 18 to Dec. 20, the sources said.
The USD bond will be issued via India Vehicle Finance, or IVF, an offshore orphan special purpose vehicle incorporated in Mauritius and registered as a foreign portfolio investor, or FPI, with India’s market regulator Securities and Exchange Board of India, the sources said. An orphan SPV allows Indian companies to pool select assets, often for the purpose of issuing USD bonds. The bonds are subsequently serviced through receivables from the pooled assets.
Proceeds from the planned issue will be used to subscribe to 95% of INR senior tranche pass-through certificates, or PTCs, issued by Sansar Vehicle Finance Trust Dec 2022, against an initial loan portfolio of 113.75% and static cash collateral deposit of 5%. The PTCs will be rated ‘AAA’ domestically by rating agency ICRA, sources said. Of the total proceeds, about $500,000 will be retained by IVF for capitalization, with the rest used for paying transaction costs. Receivables from the underlying loans of the covered bonds will serve as security for the bond, the sources further added.
The orphan SPV structure is likely to facilitate an investment grade rating of around ‘BBB-’ from Fitch, the sources said.
Barclays Bank is global coordinator, and Deutsche Bank, HSBC, JPMorgan and Standard Chartered Bank are joint lead managers.
Shriram Finance did not respond to an emailed request for comment. IFC could not be reached for immediate comment.
–Subrata Panda