Rural Electrification Corporation will raise $200 million (Rs 990 crore) through Swiss franc-denominated bonds. The roadshow for these bonds, with a maturity of five years, will be next month.
“Our arrangers have told us that the poor market conditions will not affect our fund-raising plans. We should be able to raise $200-mn during our road show, planned on October 10 and 11,” said H D Khunteta, chairman and managing director.
REC has appointed Credit Suisse, Deutsche Bank, Royal Bank of Scotland and UBS as the issue’s arrangers.
The floor being set by the Swiss central bank for the Swiss franc to ensure it does not rise beyond a point against the euro has not stopped REC’s bond plan. “The cost of raising funds is what really matters.It is certainly very low in the Swiss market,” said Khunteta. “We expect a yield of 2.75 per cent.”
Recently, the floor was set for the Swiss franc against the euro at 1.20 by the Swiss National Bank. The franc’s continuous rise was hurting Swiss exports and eroding economic growth. Firms raising funds in Swiss francs will not be able to enjoy lower swap costs due to the capping of the currency.
However, higher interest rate spreads and stability of the currency has maintained its popularity. The yields on bonds are hovering at 9.5-10.5 per cent in India, much higher than that in the Swiss market.
“The (euro/franc) floor may result in investors borrowing more CHF (francs), given that the risk of appreciation has now lessened while CHF interest rates are likely to remain low,” said Mitul Kotecha, managing director and head of global exchange research at Crédit Agricole Corporate & Investment Bank.