RCom raises $300 mn in overseas debt at 6.5%

Country's fourth largest telcom operator Reliance Communications (RCom) has mopped up USD 300 million from global investors by selling 5.5-year dollar debt at 6.5 per cent.
"The company has launched, closed and priced the issue of Notes on April 27, 2015. The Notes have a tenor of 5-1/2 years due in 2020 and carry a coupon of 6.5 per cent per annum, payable semi annually. The Notes are expected to be settled by May 6, 2015. The Notes will be listed on the Singapore Stock Exchange," RCom said in a statement today.
"RCom has priced its USD 300-million dollar bond issue at 6.5 per cent. The issue got oversubscribed with order-book in excess of USD 650 million with more than 100 investors participating.

"The bonds snapped up by investors from across Asia, Europe and Middle East," Jujhar Singh, Managing Director & Co-Head of High Yield Product Group at Standard Chartered Capital Markets, which was one of the merchant bankers for the deal, told PTI.
Singh said this is the first dollar bond issuance by the Anil Ambani-run company and also the first by a domestic telco to use the proceeds onshore.
"This is the largest sub-investment grade bond issuance till date in 2015, and paves the way for more such issuances from India."

The company in November last hit the market with a bond issue, but had to withdraw the issue as it could not get good pricing. While last time it could not get a rating, this time around the company has managed ratings from two international agencies - Moody's and Fitch - both of which have assigned 'Ba3' and 'BB', respectively to the issue.

Moody's Investors Service, in a statement, said its rating on the notes is in line with the corporate rating as they are senior secured obligations of the company.
The proceeds from the issue will be used for capital expenditure or any other permissible end-use as prescribed by the Reserve Bank, Moody's said.
From the March auctions, RCom won spectrum at a cost of Rs 4,300 crore, and made an upfront payment of Rs 1,100 crore, thereby increasing its already high debt, which is 4.8 times its equity, making it the most leveraged telco.
Fitch Ratings said RCom will use part of the proceeds to fund the spectrum payout and the rest for capex purposes.

It can be noted after a record USD 20 billion debt raising in 2014, Indian corporates withdrew from the overseas debt market as the US Fed taper talk loomed and global volatility increased. Since mid-February, there has been practically no serious issuer in the market.