Firms rush to leverage weak dollar interest rate, strong rupee
A clutch of companies are tapping the external commercial borrowings (ECB) market and are raising close to $400 million to take advantage of low dollar interest rates and an appreciating rupee. The Indian Railway Finance Corporation (IRFC) had last week closed a $75 million issue.
Mumbai-based power distribution major BSES is in the market for a $100 million foreign currency term loan facility of five years.
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IL&FS has floated a $30 million issue, while LIC Housing Finance has hit the street with a $50 million issue. National Thermal Power Corporation has issued a request for proposal (RFP) for a $100 million issue.
Dealers said that other public sector undertakings and corporates are also looking at borrowing from the ECB market.
The IRFC issue was a 5-year bullet maturity syndicated term loan facility.
The issue was tightly priced at 70 basis points above London Inter-Bank Offered Rate and the all in cost was at 87 basis points above Libor.
The lead arrangers of the issue were Barclays Capital, HSBC, Credit Lyonnais, RZB Austria and State Bank of India.
The issue was drawn down on March 31, 2003 even though it closed on April 30.
The six month Libor is currently at 1.25 per cent and it has been around the 1.25 -1.35 per cent in the last two months.
The pricing on ECB loans on a completely hedged basis currently works out cheaper than the rupee loans. The five year dollar-rupee swap rate is at 4.55 per cent which is again at an historical low.