International rating agency Moody's today said the recent international junk bond sales by domestic companies offer the best protection to investors as they have the highest overall covenant quality scores.
Noting that the Indian bond covenants are strong, Moody's said the recent junk bond sales by Indiabulls Real Estate's USD 175 million (B1 stable), Delhi International Airport's USD 288 million (Ba1 stable), Lodha Developers' USD 200 million (Ba3 stable) and Reliance Communications' USD 300 million (Ba3 stable) provide stronger protection for investors than bonds issued by other rated high-yield companies globally.
In March, Delhi International Airport sold USD 288.75 million worth 7-year junk bonds to international investors at 6.12 per cent.
Last November, Indiabulls Real Estate for the first time tapped the global bond market by selling USD 175 million of junk bonds by selling 5-year notes at 10.25 per cent, the second highest ever by a domestic issuer.
Lodha Developers, after failing in November to sell USD 350 million bonds, finally made it in March by raising USD 200 million at a whopping 12 per cent in 7 year money, making it the costliest ever bond offering by any domestic company.
Reliance Communications too raised USD 300 million by selling offshore bonds at 6.50 per cent for 5.5 year maturity notes to international investors.
Low-rated securities are called high yield or junk bonds as they fall below the investment grade.
The Moody's report said that among these four, Lodha has the strongest overall covenant quality score and Indiabulls has the weakest score of the four.
Explaining the rationale for tagging these issuances as highly protected, the report said these issuers have better ability to pay dividends, make risky investments or take on incremental debt is limited.
