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IFC guarantee for Bharti Mobile bond issue

As part of its efforts to be more responsive to client needs and extend credit in local currency, the International Finance Corporation has offered a structured partial credit guarantee for a local currency bond issue by Bharti Mobile Limited.

The bond issue-which has been structured as three different offerings with tenors of five, eight and ten years, respectively, will encourage mutual funds and short-term investors to finance infrastructure projects.

It will also target different investor market segments and help create liquidity in local currency corporate bond markets.

The total issue size is Indian Rs 2.1-billion.

Crisil, the Indian affiliate of Standard & Poor's, and ICRA, the Indian affiliate of Moody's, have rated the debt issue AA+ and LAA+, respectively.

The issue was very well received in the market with significant over-subscription. In addition, its innovative structure drew strong support from mutual funds and newly established insurance companies, thus providing a model by which these non-traditional sources may be used to finance long-term infrastructure projects.

Mohsen Khalil, director of the joint IFC-World Bank department for global information and communication technologies, said that the investment will establish a benchmark in the Indian domestic capital markets for high quality infrastructure debt paper that has the potential for secondary trading.

He added that it would provide an instrument by which India's high savings rate might be used to fund much needed infrastructure activities.

Nina Shapiro, IFC treasurer, said that the new product addresses the need for long-term local currency funds for non-AAA corporations which are often not available in the capital or bank markets of developing market countries.

IFC now plans to offer partial credit guarantees on a global basis to other clients in the emerging markets for bond and loan transactions, she added.

By offering a partial guarantee, rather than a full guarantee, IFC is able to mobilise additional funds by having investors invest in debentures in excess of IFC's guaranteed amount. This co-financing between IFC and the Indian capital markets allows BML to access new funding sources and raise funds in excess of IFC's guaranteed amount.

BML, which operates cellular licenses in Karnataka and Andhra Pradesh, is a part of Bharti Enterprises, one of India's leading telecom conglomerates and the only integrated private sector telecom company in India.

Sunil Bharti Mittal, chairman and group managing director, Bharti Enterprises, said that Bharti was interested in creating path-breaking solutions and was pleased to partner with IFC in this innovative infrastructure project financing initiative - a significant first for India.

Akhil Gupta, joint managing director, Bharti Enterprises, added that this type of innovative infrastructure project financing symbolises Bharti's ability to raise funds for its projects well in time and reinforces its commitment to build India's telecom infrastructure.

The mission of IFC, part of the World Bank Group, is to promote sustainable private sector investment in developing countries as a way to reduce poverty and improve people's lives.

IFC finances private sector investments in the developing world, mobilizes capital in the international financial markets, and provides technical assistance and advice to governments and businesses.

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