Shriram Finance raises $300 million via innovative ABS transaction

Mumbai: In a first-of-its-kind transaction, Shriram Finance Monday raised $300 million through an international transaction model using asset-backed securities (ABS) at a lower interest rate than the initial guidance, underpinned by firm investor demand for the debt being sold by India's second-biggest non-bank lender.

Shriram Finance raised the funds by securitising part of its loan portfolio and then selling it to international investors, with the investors spread across Asia, sources aware of the developments said to ET.

The transaction, which had a maturity of 6.5 years, was priced at 5.85%, lower than the initial pricing guidance of 6.15%, the sources said, adding the arrangers for the deal included HSBC, Standard Chartered Bank, Barclays, Deutsche Bank and JP Morgan.


HSBC and Standard Chartered Bank declined to comment, while emails sent to the other banks did not receive responses by the time of publication.

DBS Bank, one of the arrangers to the issue, declined comment on the matter.

The nature of the ABS transaction provides an advantage to the issuer - Shriram Finance - in terms of enhancement of credit rating, another source said, adding that the model entailed an offshore entity purchasing an onshore ABS and converting the same to US dollars using a foreign exchange swap.