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Treasury & Capital Markets
NTPC achieves low new issue concession in latest bonds
Reg S deal was priced at 99.324% with a coupon of 4.50% to offer a yield of 4.585%, representing a spread of 170bp over the US treasuries, or 10bp tighter than the initial guidance of 180bp
Chito Santiago 15 Mar 2018

INDIA’S largest state-owned power generation company NTPC Limited priced on March 12 a US$400 million bond offering, achieving the lowest new issue concession by any Asian corporate or quasi-sovereign issuer outside of Japan for 10 years among recent offerings.

The Reg S deal was priced at 99.324% with a coupon of 4.50% to offer a yield of 4.585%. This represented a spread of 170bp over the US treasuries, or 10bp tighter than the initial guidance of 180bp.

The transaction was launched when the Hong Kong markets opened in not so sanguine market conditions. The order books continued to build steadily throughout the day despite investor concerns on duration and the expected large supply coming from other Asian issuers.

The demand amounted to about US$800 million at the beginning of the London session, providing the deal arrangers with the opportunity to revise the price guidance down to 170bp. Despite the relatively low new issue concession, the books basically held steady with the final demand amounting to more than US$750 million from over 60 accounts.

In terms of geographical distribution, 79% of the bonds were distributed in Asia, 18% in EMEA and 3% in offshore US. By type of investors, fund managers accounted for 46%, insurance companies 36%, public sector 12% and banks 6%.

The bonds are drawn under NTPC’s US$6 billion medium term note programme, and the proceeds will be applied to finance capital expenditure of ongoing and/or new power projects, coal mining projects, and renovation and modernization of the company’s power stations in accordance with the external commercial borrowings guidelines of the Reserve Bank of India. The use of proceeds will be for projects only in India

The deal features a change of control clause in which the Indian government ceases to own, directly or indirectly, more than 50% of the voting securities of NTPC.

Axis Bank, Barclays, MUFG and Standard Chartered acted as the joint bookrunners for the transaction.

In January 2017, NTPC priced its inaugural euro-denominated bond offering amounting to 500 million euros (US$617 million) for 10 years. This represented the first ever 10-year euro-denominated bond for a BBB- rated issuer from Asia, ex-Japan.

In November 2017, Moody’s Investors Service raised NTPC’s issuer rating from Baa3 to Baa2 in line with India’s sovereign rating upgrade. The installed capacity of NTPC represents 15.8% of India’s installed power generation capacity. In terms of overall power generation, the company accounted for 23.8% in the fiscal year ending March 2017.

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