Tata Steel (Ba3/BB–/BB) has raised US$1.3 billion, in $300 million of 5.5-year paper at 4.45% and $1 billion of 10-year paper at 5.45%, to refinance its offshore obligations, which will help de-risk its balance sheet as well as enhance financial flexibility.  This borrowing marks the steel company’s first return to the overseas debt market since mid-2016.

The India-based leading alloy producer used its Singapore arm Abja Investment for this overseas fund-raising, garnering from foreign investors an order book size of more than $7 billion.  As a result of overwhelming demand, Tata Steel was able to price its 2 tranches at rates lower than price guidance, which was at 5.875% area for the 10-year and 4.875% area for the 5.5-year.  More than half of the 10-year notes, or 56%, went to EMEA investors, a rare feat for Asian Reg S deals, highlighting the global demand for Tata Steel’s bonds.  Asia was allocated 42% and offshore US accounts had 2%.  In terms of the split of investor type, fund managers took 58%, banks 26%, corporates and insurers 6% and others 10%.  For the 5.5-year notes, Asia was allocated 53% and EMEA 43%, whereas offshore US accounts took 4%.  By investor type, funds and asset managers were allocated 41%, banks 35%, corporates and insurers 10%, sovereigns 8% and the rest went to other investors.

Tata Steel’s fund-raise from the overseas debt market reflects the growing trend among Indian companies’ preference for dollar bond issuances as they cash in on bullish investor sentiment and low borrowing costs.  In the recent past, ICICI Bank and RIL raised $500 million and $800 million, respectively, in international bonds.

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