Foreign lenders are racing to give loans to Mukesh Ambani-led Reliance Industries Limited (RIL) as the oil-to-telecom conglomerate is India’s most valued firm boasting a BBB+ credit rating, which is higher than the country’s BBB- sovereign credit rating.
Mukesh Ambani-led Reliance Industries Limited (RIL) is the most valuable company in India, and some of the largest banks in the world are reportedly queuing up to provide loans to the Rs 21,18,951 crore firm. According to reports, in December last year, Reliance inked a deal with a consortium of 11 bank for a $3 billion, and now at least 10 more banks around the world, from Australia to North America, want to join this syndicate.
Reports citing sources said that the banks include major names such as Australia’s ANZ bank, Bank of Taiwan, Mega Bank and CTBC Bank of Taiwan, Europe’s Barclays, Deutsche Bank, Intesa Sanpaolo and KFW Ipex Bank, Korea Development Bank, and US-based JP Morgan, adding that Reliance and the lead banks want to maximum number of lenders to join the consortium.
According to an Economic Times report, these lenders will function as secondary debt providers and take over part of the loan committed by lead banks that took part in the first round of the syndicated loan facility. The Mukesh Ambani-led conglomerate has already selected the secondary lenders, the report said, citing sources.
Why foreign banks are eager to provide loans to Reliance?
As per various reports, foreign lenders are racing to give loans to Reliance as the oil-to-telecom conglomerate is India’s most valued firm boasting a BBB+ credit rating, which is higher than the country’s BBB- sovereign credit rating. The Mukesh Ambani-led company is also India’s largest in terms of revenue and market cap.
How much has each bank contributed?
Citing loan document, ET reported that Reliance’s $3 billion syndicated loan facility has been divided among 11 lenders, with State Bank of India being the sole domestic bank having a $275 million share in the loan.
As per the report, Bank of America lends the largest share of the loan at $343 million, followed by DBS Bank and HSBC ($300 million each), Japan’s MUFG ($280 million), and Japanese lenders Standard Chartered, Mizuho Bank, and SMBC ($250 million exposure each), while First Abu Dhabi Bank, Citibank, and Credit Agricole CIB have contributed $241 million each.
The 5-year loan is in dual-currency denominations—US dollars and Japanese yen, and was reportedly priced at 120 basis points over the three-month Secured Overnight Financing Rate (SOFR) in December, and the $450 million yen-denominated loan was priced at 75 basis points above the three-month Tokyo Interbank Offer Rate (TIBOR).
What is a loan syndication?
A loan syndication is an agreement involving multiple banks, in which the lead lenders earn a small fee and may negotiate better pricing between themselves and secondary lenders, however, the company borrowing the money doesn’t see a change in the overall loan cost or interest rate.