CANARA Bank rode the wave of continued investor demand for buying Indian credits and the lack of supply to raise another US$200 million when it re-opened a bond deal that it printed in August this year.

The Indian lender on October 10 priced the tap on existing notes maturing in 2022 at 100.481% with a coupon of 3.25% to offer a yield of 3.141%. This was equivalent to a spread of 119bp over the US treasuries, or 16bp tighter than the initial price guidance of the 135bp area. This is the lowest spread for an Indian bank issue since the global financial crisis and the tightest pricing ever achieved by Canara for a US dollar bond.

The tap was priced 31bp inside the original issue of US$400 million, making it one of the tightest compressions on a spread-at-issue between a tap issue and the original offering.

The Reg S transaction was launched at the Hong Kong market open and Canara timed the offering to take full advantage of the strong pricing window just before the Federal Open Market Committee minutes.

The robust interest in Indian financial institution credits manifested in recent issuances that saw the demand grow steadily and the order book was fully covered within two hours of the deal launch.

While the Asian accounts kept coming throughout the day, the opening of the Middle East and London sessions lifted the book to a peak of 2.8x the base issue size. The prevalent investor buying in Indian credits and the scarcity of supply had seen a compression in the spreads of the Indian financial institution universe.

Given the strong demand, the arrangers – Axis Bank and Standard Chartered – decided to revise the pricing and released the final guidance at the 120bp area (+/- 1bp). The book remained strong despite the pricing compression of 15bp and hence, the syndicate decided to make the book subject by London afternoon.

The final order book amounted to about US$430 million and enabled the arrangers to price the transaction at the tight end of the guidance at 119bp.The bond tap was drawn under Canara’s US$2 billion medium-term note programme and through its London branch.

In terms of geographical distribution, 63% of the bonds were sold in Asia and 37% in EMEA. By type of investor, banks accounted for 75%, fund managers 17% and private banks 8%.

As of end-June 2017, Canara reported standalone assets of about 5.80 trillion rupees (US$89.35 billion).