Thursday, June 20, 2024

Reliance Industries secures $2 bn additional loan

The conglomerate has thus got a total loan of $5 billion, making it the largest fundraising through the syndicated loan route in India’s corporate history.

Reliance Jio Infocomm Ltd, a unit of RIL, secured the $2 billion add-on facility on Tuesday with the same terms as its recent $3 billion syndicated loan.

The funds will mainly be allocated towards RIL’s capital expenditures and Jio’s nationwide 5G expansion.

“The $2 billion add-on will be split equally between RIL and Jio and is likely to be wrapped up by the end of April,” said one of the three people, requesting anonymity.

The conglomerate has emerged as one of the most sought-after groups by banks for syndicated credits.

“The funding offer for Jio’s expansion plan is phenomenal,” said a veteran investment banker aware of the RIL deal.

DBS is the lead arranger for Reliance Industries Ltd’s $2 billion add-on credit line, having also played the same role for the $3 billion syndicated credit.

The borrowing was priced at 146 bps and 156 bps for RIL and its telecom arm Reliance Jio Infocomm, respectively, over the benchmark secure overnight financing rate.

The $3 billion fundraising plan was launched in mid-January through general syndication and was closed after months of negotiations.

“Eighteen banks, including the 15 senior MLABs (mandated lead arranger and book runners), which are the key coordinator of any syndication of the $3 billion loan and others joining in the senior phase are expected to form the syndicate for the $2 billion add-on,” the first person cited above said.

The size of the add-on is also unusually large in Asian loan markets, especially in an unplanned greenshoe option for any syndicated loan.

“RIL’s decision to raise the additional $2 billion stems from the overwhelming response from the market as lenders remain hungry for the blue-chip group that has not been active in the syndicated loan market in recent years,” the first person said.

Of the $3 billion raised earlier, nearly a third or $927 million of the allocations went to 19 Taiwanese banks that dominated the third and the final list of lenders in the syndicate, while another eight from Japan took $276.36 million combined.

The $3 billion borrowing has also been split equally between RIL and Jio, with the latter’s portion being its first non-recourse loan.

Last year, Jio secured a $750 million five-year new-money club loan for capital expenditure.

RIL’s last syndicated offshore borrowing was a $1.45 billion dual-currency financing completed in 2020, comprising a $1.1 billion loan with a 3.5-year tenure and a 38.45 billion yen loan for a five-year tenure.

“The yen loan offered an all-in pricing of around 78 –81 bps, while the US dollar tranche paid an all-in of 101.5 bps based on a margin of 79 bps over Libor and an average life of 3.25 years,” the first person said.

The $3 billion credit line closed last week is Reliance Group’s largest syndicated loan and is split into $1.15 billion and 48.78 billion yen ($380 million) tranches with an average life of 5.25 years for RIL and five-year portions of $1.2 billion and 41.81 billion yen for Jio, the person said.

ANZ Group, Bank of America, BNP Paribas, Credit Agricole CIB, Citigroup, DBS Bank, First Abu Dhabi Bank, HSBC, Scotiabank, Standard Chartered Bank, State Bank of India and United Overseas Bank were the senior MLABs on the dollar tranches for both borrowers.

Mizuho Bank, MUFG and Sumitomo Mitsui Banking Corp underwrote the yen tranche for Jio’s loan, with Credit Agricole lending alongside the three Japanese banks on the yen portion for RIL’s borrowing.

The low-fee fundraising by RIL indicates that banks are seeking top-rated companies amid the ongoing economic uncertainty.

Lenders are comfortable extending loans to RIL because of the group’s low leverage and the dominance of Jio in the domestic telecom market.

“Documentation was done on Tuesday for around $5 billion,” according to a person briefed on the details. Another person added that the size of the add-on is two-thirds of the original $3 billion loan – close to $2 billion — which would be used for an ‘unplanned green shoe option’.

“Liquidity should remain robust owing to the exceptional financial flexibility, given the company’s resource-raising ability from capital markets and sizeable cash and liquid investments of 193,282 crore as on 31 December at a consolidated level. Moreover, financial flexibility remains supported by sizable bank lines, which usually remain moderately utilized. Sufficient cash accrual and cash and cash equivalents should be adequate to meet maturing debt as well a portion of the capex requirement,” a Crisil Ratings report on RIL said on 23 February.

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