Fresh approach
Reliance Industries’ blockbuster US$4bn triple-tranche bond came before market conditions worsened, but there was nothing simple about it.
After five years away from the offshore market, the Indian blue chip announced a mandate for global roadshows on January 4, and initial price guidance for a 10, 30 and 40-year bond offering came the following day. The timing proved perfect, despite Airport Authority Hong Kong selling a US$4bn deal with the same tenors on the same day.
The transaction, rated Baa2/BBB+ (Moody’s/S&P) like the issuer, was split between US$1.5bn 2.875% 10-year, US$1.75bn 3.625% 30-year and US$750m 3.75% 40-year tranches. All three priced inside Reliance’s secondary curve, and it achieved the tightest Treasury spreads at all tenors for an Indian corporate.
The deal was the largest foreign currency bond issuance from India, and the first 40-year trade from a Triple B private sector corporate from Asia ex-Japan. The tenors were a feat for 2022 in general, as investors became skittish about maturities longer than two or three years as the year went on.
Investors ate up the notes, pushing the overall order book to US$12bn at its peak. The 144A/Reg S deal had strong support from Europe and the US, with investors from the two regions taking 56% of the 10-year notes, 45% of the 30-year and 35% of the 40-year.
Reliance had initially looked to issue the notes at the end of 2021 but the market began to unravel around that time, as Chinese property developers announced a slew of missed payments and defaults, and the new Omicron variant of Covid spread around the world. The leads advised Reliance to hold off until the start of 2022.
That gave Reliance extra time to present itself to investors, and sell the story of the “new” Reliance. The company has been on a journey since its last US dollar bond sale in 2017, transitioning from being predominantly a petrochemical company to expand its digital, retail and green energy businesses. While the notes did not carry a green label, Reliance used the opportunity to explain its goal to reach net-zero carbon emissions by 2035.
“This is not the Reliance of old. It’s about futuristic Reliance,” said one banker. The timing proved to be perfect, as Reliance not only grabbed a better market window than the end of 2021, it also snapped up demand before the primary bond market went south just a couple of weeks later. Only US$6.8bn was raised by Indian bond issuers offshore in all of 2022, with the last deal of the year sold at the end of March.
Bank of America, Citigroup and HSBC were joint global coordinators as well as joint active bookrunners with Barclays, JP Morgan and MUFG. ANZ, BNP Paribas, Credit Agricole, DBS Bank, Mizuho Securities, SMBC Nikko, Standard Chartered and State Bank of India were joint passive bookrunners.
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