Tata Group firms seek­ing $2.5b in syn­di­cated loans

The Pak Banker - - COMPANIES/BOSS -

In­dia's big­gest con­glom­er­ate is ask­ing loan bankers for al­most as much money as global fund man­agers have pulled from the na­tion's stock and bond mar­kets this year. Tata Com­mu­ni­ca­tions Ltd, Tata Mo­tors Ltd, Tata Power Co. Ltd and Tata Steel Ltd are seek­ing to bor­row a com­bined to­tal of about $2.5 bil­lion in syn­di­cated loans. That com­pares with the $2.7 bil­lion that for­eign­ers have pulled from the na­tion's equity and bond mar­kets this year amid an emerg­ing mar­ket rout.

In­dian firms are look­ing to syn­di­cated bankers for re­lief as off­shore note sales fell to a six-year low so far in 2016, the ru­pee suf­fered the se­cond-big­gest loss in Asia and the Sen­sex stock in­dex slumped 12%. Re­liance In­dus­tries Ltd is among a pipe­line of com­pa­nies seek­ing about $6.5 bil­lion in dol­lar loans af­ter costs plunged to an eight-year low. Bor­row­ers can point to an econ­omy grow­ing at 7% an­nu­ally, the high­est among ma­jor emerg­ing economies, and a cen­tral bank stock­pil­ing for­eign re­serves.

"With China slow­ing down, Brazil shrink­ing and Europe stag­nant, choos­ing In­dia is like pick­ing the best among the weak­est," said Su­dar­shan Shree­ni­vas, di­rec­tor for cor­po­rate rat­ings at In­dia Rat­ings and Re­search. "Growth is still vis­i­ble." Lenders aren't spoiled for choice. China's econ­omy is grow­ing at the weak­est pace in 25 years, Rus­sia is reel­ing from the oil price slump and Brazil's sov­er­eign rat­ing was cut to junk this week by Moody's In­vestors Ser­vice amid the na­tion's worst re­ces­sion in a cen­tury.

The Tata bor­row­ings will be most by the group com­pa­nies at the start of any year if suc­cess­ful, ac­cord­ing to data com­piled by Bloomberg. They're part of group chair­man Cyrus Mistry's mis­sion to re­duce the debt bur­den across his $109 bil­lion coffee-to-cars con­glom­er­ate by ei­ther sell­ing as­sets or re­fi­nanc­ing debt at cheaper rates.

Tata Power this week man­dated seven banks for a $460 mil­lion loan of­fer­ing 195 ba­sis points over the Lon­don in­ter­bank of­fered rate (Li­bor), peo­ple fa­mil­iar with the mat­ter said. The deal will re­fi­nance a bridge fa­cil­ity cost­ing 225 ba­sis points. Tata Steel be­gan mar­ket­ing a $1.5 bil­lion fa­cil­ity to lenders last month, while Tata Com­mu­ni­ca­tions and Tata Mo­tors have loans of $250 mil­lion each in syn­di­ca­tion.

Tata Power de­clined to com­ment be­yond ex­change fil­ings while e-mails to the other three Tata com­pa­nies went unan­swered. Other bor­row­ers mar­ket­ing loans in­clude re­finer Hin­dus­tan Pe­tro­leum Corp. Ltd, ONGC Videsh Ltd, the over­seas unit of the na­tion's big­gest ex­plorer Oil and Nat­u­ral Gas Corp., and Re­liance, owned by In­dia's rich­est man Mukesh Am­bani. "For­eign banks are show­ing an in­creas­ing in­ter­est in In­dian loan syn­di­ca­tion mar­kets, es­pe­cially the Tai­wanese and Ja­panese names," said Sid­harth Rath, Mum­bai-based pres­i­dent for trea­sury, cor­po­rate and trans­ac­tion bank­ing at Axis Bank Ltd. "The mar­ket in­spires con­fi­dence for bet­ter- known In­dian com­pa­nies and so mar­gins are more favourable to them."

The cen­tral bank may also pro­vide some com­fort. Re­serve Bank of In­dia ( RBI) gov­er­nor Raghu­ram Ra­jan is re­build­ing for­eign re­serves to fight a slide in the ru­pee and high in­fla­tion. The cur­rency stock­pile rose $4.3 bil­lion in the three weeks through 12 Fe­bru­ary, the long­est run since Oc­to­ber, as the ru­pee flirted with touch­ing a record low this month.

In­dian bor­row­ers re­fi­nanced a record $11.4 bil­lion of over­seas bor­row­ings last year, spurred by av­er­age mar­gins on dol­lar loans fall­ing to 187 ba­sis points more than Li­bor, the low­est since 2007, ac­cord­ing to data com­piled by Bloomberg. Tata com­pa­nies also took ad­van­tage of the cheap fi­nanc­ing to raise more than $1 bil­lion of loans last year. That fol­lowed al­most $2.9 bil­lion of fa­cil­i­ties in 2014, the most in a full year for the con­glom­er­ate, ac­cord­ing to Bloomberg-com­piled data.

"The group over­all still en­joys a very good rep­u­ta­tion ver­sus its In­dian peers," said Pierre Fad­doul, head of credit re­search at Tokio Marine As­set Man­age­ment In­ter­na­tional in Sin­ga­pore. "I don't nec­es­sar­ily think the fun­da­men­tal pic­ture or out­look for In­dia has changed much over the past few months."

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