Union Bank of India raises $350 million by selling offshore bonds

MUMBAI: State-owned Union Bank of India or UBI has raised $350 million by selling offshore bonds as a part of its medium-term note or MTN programme. They will be listed in the Singapore Exchange.

A basis point is 0.01 percentage point.

Those bonds of five and half year maturities have offered a yield of about 4.50-4.54%. The bank has derived at such pricing after adding a 280 basis points spread over and above the five-year US Treasury, which is current trading in the range of 1.70-1.74%.

“The entire fund will be used for offshore operations,” a senior bank official told ET adding that rates offered were win-win for both the investors and the bank. Institutional investors across Asia, Europe and Middle East have subscribed to the issuance.

UBI has sold bonds through their Hong Kong branch. These offshore bonds are called Regulation S where they may not be necessarily offered and sold within US.

Standard Chartered Bank, Citi Bank, BNP Paribas, Bank of America Merrill Lynch and JPMorgan Chase were the investment bankers for the issue building.

Those securities were rated Baa3 by Moody’s Investors while S&P, another global rating company, has assigned a BBB- to the issuance.

Almost two weeks ago, the State Bank of India or SBI had raised a total of US$1.25 billion by selling bonds in two maturities: five and ten years.

The five-year bond was priced at a spread or gap of 205 bps over the five-year US treasury, which would be equivalent to a yield of 3.62%. This is significantly below than the Union Bank of India’s spread at 280 bps.

“Being the largest Indian lender SBI commands premium among investors, who always consider the bank as quasi-government bond. The rest state-owned banks do not enjoy the same,” said an investment banker.

Earlier, Union Bank has already raised about three-fourth of their MTN limit. The residual limit will be exhausted in the current year as and when they expand offshore operations.