Indian Oil Corporation (IOC) is raising Rs 400 crore through a one-year, unsecured, syndicated rupee loan.
The interest rate for the facility, which is payable and reset quarterly, will be benchmarked to the reference rate of three-month commercial paper (CP). In effect, this will be a three-month facility to be rolled over for a year.
The interest payments will be set at a margin of 10 to 25 basis points over the reference rate and the cut-off margin will be determined through book-building.
The proposed loan is structured on the lines of the foreign currency syndicated loans and will have a uniform pricing benchmark and common documentation for all lenders.
While Standard Chartered Bank is the book-runner, lead arranger and facility agent and Union Bank of India is the joint arranger to the facility.
Tarun Saigal, head (fixed income), Standard Chartered Bank, said: "We are attempting to create a market for syndicated rupee loans. The loan to IOC will be at a floating rate, which will be repriced every quarter in accordance with the CP reference rate."
"IOC would not need to issue three-month CP four times a year. At the same time, it is assured of liquidity for one year and the interest rate is repriced after every three months. There is a commitment for one year and the lender reaps the benefit of a floating rate. Instead of a 90-day CP with repricing after every three months, you have a loan which is being repriced after every three months," adds Saigal.
Currently, the three-month CP rate is pegged at 8.20 per cent. The benchmark rate has a floor of 7.5 per cent and a cap of 12.50 per cent. The issue opened on October 8 and will be kept open for a month.
