Power Finance Corporation (PFC) has revived its plan to raise $1 billion via medium-term notes (MTN). The power sector lender, which had deferred its MTN plan in November, is looking to roadshows this month to raise funds.
PFC chairman and managing director Satnam Singh said the corporation spoke to the merchant bankers on Friday regarding the MTN issue. “The global economic situation has slightly improved. We should be ready to do the roashows in about two weeks’ time from now,” he told Business Standard.
The MIFOR (Mumbai interbank forward offer rate) is down by 60-70 basis points, which makes the environment more conducive to raise funds, he said further.
The total cost of raising funds overseas is the sum of MIFOR and cost to company. MIFOR, in turn, is the sum of LIBOR and forward premium, which is paid to hedge against foreign exchange risks. Hence, a significant fall in MIFOR reduces the cost of borrowing funds overseas.
“If we raise funds in the domestic market, the yields are as high as 9.5 per cent,” Singh said. “We want to go ahead and raise funds overseas in such a way that our total cost of fund raising including the hedging costs is less than the domestic cost of funds.”
Currently, 1 month MIFOR is hovering around 7.78 per cent. In end-December, it went as high as 9.15 per cent.
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The government-controlled non-banking financial company had plans to go for a roadshow immediately after consulting the merchant bankers this month. However, the firm will wait till it declares its third quarter results for the current financial year.
“Our merchant bankers told us that it is not advisable to go for the roadshow just before the announcement of quarterly results,” Singh said. The investors want to know the latest financial performance of a company before putting in their money, he explained.
PFC, founded in 1986, will be doing the roadshows in Hong Kong, London and Singapore. “After doing the roadshows, we shall take up the pricing issues with the investors,” Singh said.
Bank of America Merrill Lynch and Royal Bank of Scotland are the arrangers for the issue. The power-sector lender may decide to raise funds in tranches, depending upon the investor appetite. The firm had postponed its MTN issue from November, as the market conditions were not conducive to raise funds overseas on account of risk aversion and subsequent dollar crunch.