RIL goes debt-hunting to raise $1 billion

Mumbai: Mukesh Ambani-led Reliance Industries plans to raise about $1 billion through a syndicated overseas loan at the lowest interest rate in more than a decade, three people with direct knowledge of the matter told ET.A cluster of nine banks including State Bank of India, Mitsubishi UFJ Financial Group (MUFG), Citibank, HSBC, Bank of America and DBS Bank are likely to price the loan after adding a spread, or mark-up, of 95 basis points over the US dollar-based three-month London Interbank Offer Rate (LIBOR), which is at about 0.25% now. A basis point is 0.01 percentage point. SBI and MUFG together will likely lend about $600 million and the seven other banks will advance the remainder. The loan may be of three-year maturity. “A double-digit spread is being obtained for the first time since 2009 as the same has been in the triple-digits in the past years,” said a senior banker associated with the conglomerate’s fundraising for many years.More than a month ago, government-owned EXIM Bank raised an offshore loan, priced at LIBOR, a global gauge, plus 125 basis points.Reliance did not reply to ET’s query. Individual banks could not be contacted immediately.The loan will be used to repay the debt of Reliance Holding USA, a subsidiary that was recently amalgamated with another arm, Reliance Energy Generation and Distribution Ltd. to simplify its corporate structure.“The authorities approved the scheme of amalgamation but asked Reliance not to use its India balance sheet (cash) to repay the US-based entity’s debt,” said a senior executive involved in the fundraising exercise.RHUSA raised its maiden dollar bonds in 2010, offering 4.5% with 10 and 30-year maturities. The 10-year paper comes up for maturity on October 20. Reliance could have gone for bonds, but time is too short to arrange an offshore bond sale, which takes longer than loan syndication. Also for loans, principal and interest must be repaid every year, unlike in bonds, where only interest is paid annually.The National Company Law Tribunal approved the amalgamation of the two subsidiaries in August.RHUSA is the holding company of units that offer hydrocarbon exploration and production, petroleum refining and marketing, petrochemical, retail and telecommunication services to customers worldwide.Billionaire Ambani said that his oil-to-telecom conglomerate turned net debt-free after raising a record ₹1.69 lakh crore from global investors and a rights issue. Reliance raised ₹1.15 lakh crore from global tech investors by selling a little less than a quarter of unit Jio Platforms Ltd. and another ₹53,124 crore through the rights issue.

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