ONGC to raise dollar-denominated bonds; roadshows likely next week

Oil and Natural Gas Corp (ONGC) and its overseas arm, ONGC Videsh, are looking to raise money in the offshore bond market and may issue US dollar- and euro-denominated senior unsecured notes, sources confirmed to FE.

“The size of the issue and tenure isn’t decided yet. But the companies will go for road shows next week. They will hit Singapore, Hong Kong and London to meet investors,” the source added.

The arrangers of the issue are Deutsche Bank, Citigroup, Standard Chartered Bank, RBS and BNP Paribas. The notes issued will be the US Reg S category.

In May last year, ONGC had raised $300 million through five-year bonds and $500 million through 10-year bonds. The bonds were priced at 190 and 210 basis points (bps) over the benchmark US Treasury bonds and saw orders worth $1.1 billion and $1.8 billion.

Market observers said that the new ONGC bonds may be priced at levels where the notes issued in 2013 are currently trading at, i.e., around 2.5% for five-year bonds and 3.75% for 10-year bonds.

The proposed bond issue was rated BBB- by global ratings agency Standard and Poor’s. “ONGC expects to use the proceeds of the proposed notes to refinance existing bridge loans incurred to acquire a participating interest in a Mozambique entity,” the agency said in a note.

Spreads on bond yields offshore have contracted to their lowest levels since 2007 as shown by ICICI Bank’s issue, which raised $250 million at 185 basis points over five-year US treasury. Market players also said that appetite for Indian paper abroad is high and they expect issuances worth $15 billion.

So far in 2014, Bharti Airtel, through its Netherlands subsidiary, had the biggest issuances till date. Bharti raised $1 billion in dollar-denominated bonds and 750 million euros in euro-denominated bonds.