Reliance borrows $1.5 bn for Jamnagar

The loan priced at 135 bps over Libor.

Reliance Industries today announced that its wholly owned subsidiary, Reliance Petroleum, has concluded a $1.5-billion (approximately Rs 6,750 crore) borrowing deal to part-finance its $6 billion export-oriented refinery project at Jamnagar in Gujarat.

The loan was priced at 135 basis points over Libor (London inter-bank offered rate). The six-month Libor is pegged at around 4.85 per cent and one year at 5.10 per cent.

The loan will have a door-to-door tenure of 10 years, the longest ever by an Indian corporate. In India, the maturity profile for offshore syndicated loans is largely restricted to 5-7 years.

The syndicated loan, the biggest ever sought by an Indian corporation, follows Reliance Industries' recent announcement that Reliance Petroleum will launch an initial public offer (IPO) of $1.1 to $1.3 billion to part-finance the project.

"The size and tenure of the transaction demonstrate the confidence of the international banking community in Reliance Industries and its impressive track record for timely execution of its projects," a company release said.

Recently, Reliance Industries' international ratings were upgraded to Baa2 by Moody's and BBB by Standard & Poor's. Its ratings are above the country's sovereign ratings. Reliance Petroleum is setting up a new refinery with an annual capacity of 27 million tonnes (580,000 barrels per day) and a 0.9-million-tonne polypropylene complex.

On a stand-alone basis, the refinery was the sixth largest in the world and together with Reliance Industries' existing 33-million-tonne refinery at Jamnagar, this would be the largest concentration of refinery assets at a single location globally, the statement added.

Reliance Petroleum mandated 14 leading international and domestic banks "" ABN Amro Bank NV, Bank of America NA, Bank of Tokyo Mitsubishi UFJ, BNP Paribas, Calyon, Citigroup Global Markets Singapore Pte, DBS Bank, DZ Bank, ICICI Bank, Mizuho Corporate Bank, Standard Chartered Bank, State Bank of India, Sumitomo Mitsui Banking Corporation and The Hongkong and Shanghai Banking Corporation Ltd to arrange this $1.5 billion syndicated loan.

According to the release, the new refinery, with a Nelson complexity index of 14.5, is one of the most complex refineries globally. High complexity enables the refinery to process a wide variety of crude with a flexible output.

In the calendar year 2005, Reliance Industries had raised $1.6 billion through a series of external commercial borrowings for refinancing of old loans, and modernising and importing capital goods.

Reliance Industries, it may be recalled, is the only company in Asia having the distinction of issuing 100-year bonds in international capital markets.