Indian telecommunications services company Bharti Airtel is preparing to raise a billion dollars with an offer of perpetual bonds. This move came amidst easy global liquidity and softening of US bond yields, The Economic Times reported.
The telecom major presented the plan to half a dozen MNC banks to target the offshore institutional investors amid excess global liquidity and softening bond yield. Despite its "perpetual" nature, Airtel would have the right to call the bonds - repay lenders - after five years since issue.
Last year, Bharti Airtel raised a $250 million at a coupon rate of 5.65 per cent. Perpetual bonds are securities with no maturity date for investors.
Bharti Airtel along with Reliance Industries are among the few companies that have captured the international money market with such perpetual bonds. According to ET, the company is likely to enter the market in February.
The yield on the 10-year US Treasury bill, which serves as a benchmark for pricing debt, moved between 0.55-1.88% in 2020 --- down from a range of 2.44-3.24% in 2018. The security is currently trading at 1.15%. The interest cost on debt raised by a private company is a mark-up on the sovereign paper --- with companies having a higher rating and good credit history paying a lower margin than others, as per the ET report. All Indian corporates, particularly those which have been less impacted by the Covid-induced slowdown, are in a position to reprice foreign overseas borrowings with cheaper money that has pushed down the bond yield.
About a year ago, Bharti Airtel raised $250 million through perpetual bonds at 5.65% with the company’s wholly-owned subsidiary Network i2i in Mauritius issuing the securities.
