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HDFC Bank raises $1 bn via AT-1 bonds at 3.7%

While the initial guidance was 4.125 per cent, the bank has been able to get a final pricing of 3.7 per cent, despite concerns about AT-1 bonds after the Yes Bank AT-1 write-off.

By: ENS Economic Bureau | Mumbai |
Updated: August 20, 2021 3:42:39 am
HDFC bank, business news, AT-1 bonds, Yes bank, HSBC, JP Morgan, indian express, indian express newsAn HDFC Bank Ltd. logo sits in a bank branch in Mumbai, India (Photographer: Abhijit Bhatlekar/Bloomberg News)

HDFC Bank has mobilised $1 billion (over Rs 7,400 crore) through an additional tier-I (AT-1) perpetual bond issue at a coupon rate substantially lower than the initial guidance.

While the initial guidance was 4.125 per cent, the bank has been able to get a final pricing of 3.7 per cent, despite concerns about AT-1 bonds after the Yes Bank AT-1 write-off. The bond offering received strong demand from investors across markets, and the overall demand was $4.5 billion.

“HDFC Bank’s $1 billion AT-1 bond sale, the largest offshore sale of these bonds by an Indian entity, was subscribed several times within hours of its launch on Wednesday,” said a banking source.

“The Notes will be listed on the India International Exchange (IFSC),” the private bank said in an exchange filing. Global investors like GIC Singapore, Blackrock, Fidelity Investment, HSBC Global Asset Management, JP Morgan Asset Management, Lombard Odier and Value Partners have reportedly invested in the bonds.

Ashish Parthasarthy, treasurer, HDFC Bank, said, “We believe that this successful issuance will set the road for other Indian players looking to raise AT-1 bonds in overseas markets.”

According to market sources, the AT-1 issue from HDFC Bank had come at a time when the investor community raised concerns about such bonds as they had suffered losses when Yes Bank extinguished its AT-1 bonds as part of the bailout. HDFC Bank bonds are rated Ba3 by Moody’s. A Ba3 rating is below investment grade and bonds that get this rating are categorised as junk bonds.

The bank’s AT-1 issue came a day after the RBI allowed the bank to issue credit cards to new customers. Sashidhar Jagdishan, HDFC Bank’s MD and CEO, has said that the lender will be aggressive and “come back with a bang” as it seeks to win back lost market share in the credit card segment.

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