OVL raises $2.23 billion to refinance Mozambique deal

Said to be the largest deal in the sector from Asia; BoB mops up $250 million

ONGC Videsh Ltd (OVL), the foreign investment arm of Oil and Natural Gas Corporation Limited, has raised $2.23 billion from global markets through long-term bonds to refinance loans for acquiring a stake in an oil field in Mozambique.

The finely priced deal struck last night consists $750 million in five-year bonds, $750 million in 10-year bonds and euro 525 million in seven-year bonds.

Merchant bankers associated with the transaction said all tranches were priced extremely aggressively. The pricing for the five-year dollar bonds was US Treasury yields plus  160 basis points (bps) and for the 10-year dollar paper was US Treasury yields plus 207.5 bps. This is within OVL’s fair value. The euro bonds were priced at MS+180.

“This is the largest RegS (Regulation S) deal from Asia,” said Randhir Singh, head of financing at Deutsche Bank. “It truly signifies the highest quality of ONGC’s credit and a very positive investor sentiment on India. This deal also showcases that there is abundant liquidity and depth in the RegS-only format for high-quality credits.”

RegS instruments are issued to non-US residents, allowing institutions to participate in global markets outside US laws.

The total order was almost $7 billion across the two tranches of US dollar-denominated bonds and around euro 1.9 billion for European bonds, a senior executive with a foreign bank said.

The proceeds from the offering would be used to refinance the bridge loans taken to finance the acquisition of a stake in Rovuma Basin in Mozambique, according to rating agency Moody’s. Deutsche Bank, RBS, BNP Paribas, Citi and Standard Chartered were joint book-runners.

OVL had completed the acquisition of 10 per cent participating interest in the Rovuma Area offshore block from Anadarko in February 2014. It had signed definitive agreements with Anadarko to acquire this interest in August 2013.

On June 27, Moody’s had assigned Baa2 rating to foreign currency senior unsecured bonds of OVL. The bonds are unconditionally and irrevocably guaranteed by ONGC.  In another development, public sector lender Bank of Baroda raised $250 million through five-and-a-half-year bonds from offshore markets, ahead of Prime Minister Narendra Modi’s first Budget on July 10. The lender offered more of its 4.875 per cent debt due in 2019 at a premium of 215 basis points over US treasuries, according to a person familiar with the details, who asked not to be identified because the matter was private.