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Reliance Petro concludes largest foreign currency term loan

Baburajan K

Reliance Petroleum has concluded India's largest ever syndicated foreign currency term loan deal, for $750 million (over Rs 35 billion). The $750-million foreign currency loan is in addition to the proposed ADR/GDR issue of RPL expected to be completed in the next couple of months.

"The syndicated foreign currency loan facility represents a landmark transaction for the country. The offshore funding deal also reflects the financial strength of the Reliance group," Anil Ambani, managing director, RPL, said.

The proceeds of the transaction will be used primarily for capital expenditure and other corporate purposes. The transaction is subject to government approval. As the company's offshore financing is priced around six per cent a year in dollar terms, RPL's cost of implementing new projects will be much lower.

According to banking sources, RPL, which operates the world's largest grassroots refinery, with a capacity of 27 million tonne per annum, has set new benchmarks, with the pricing for a loan with an average maturity of five years around six per cent a year in dollar terms.

A top banker said the pricing was tighter than the prevailing secondary market yields of around 6.50 per cent a year, for quasi-sovereign Indian paper, such as ICICI, equal to a spread of nearly 175 basis points over Libor.

The deal is believed to have received an enthusiastic response from all foreign banks in the country and is fully underwritten by leading banks, including ABN Amro, Grindlays, Bank of America, Citibank, HSBC, Stanchart, and Toronto Dominion.

The deal, which has an international BB credit rating, represents the largest ever offshore financing in a single tranche in India and is more than three times the size of any previous transaction in the country, analysts said.

RPL, which has a marketshare of more than 25 per cent in the petroleum products sector in India, has reported a net profit of Rs 11.67 billion on sales of Rs 234.57 billion. Its exports touched Rs 10.23 billion in the first nine months of the previous fiscal.

Its domestic debt credit ratings have recently been upgraded from BBB+, the lowest investment grade rating, to AA by credit rating agency Crisil. Another agency, Fitch, has awarded RPL an AA+ credit rating for its domestic debt.

Reliance Petroleum is also going ahead with its ADR/GDR issue. As part of the overseas float, Reliance Industries, which holds a 64 per cent stake in RPL, is planning to offer around 13 per cent stake to foreign investors in one or more tranches.

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