In what will be a first of its kind deal, Punjab National Bank (PNB) will hit the cross-border loan market with a $215 million five-year facility. However, the merger of the beleaguered IFCI Ltd with PNB is seen as delaying the deal. The transaction will be the first by a commercial bank out of India strictly for on-lending to sectors like textiles and steel. It might be recalled that in the just-relaxed external commercial borrowing norms released by the authorities, banks can contract such loans if they are to be used to restructure existing loans to these sectors. Several leading arrangers of cross-border loans have already made their presentations to the top brass of PNB, and some senior bankers say that pricing will in all probability be ‘‘in the 130s’’ — between 130 and 140 basis points over Libor. ‘‘The critical issue here is IFCI’s merger with PNB. We would like to know what the financials will look in the days after the merger, and would like to get a feel of key numbers like in the capital adequacy ratio and non-performing asset level. We would like also get some covenants written in, but nothing has been finalised and PNB is yet to get back with their response to these issues. It is also not that the deal will be held up till the merger fructifies. We are certain that the deal will go through, albeit with a slight delay,’’ a senior banker involved in negotiations with PNB said on conditions of anonymity. It was pointed out that a few banks globally have distinct appetite for exposure to banks and financial institutions, and this market is different from the regular corporate exposure. Some of these players are Natexis Banquesn Populaires (France), Raiffeisen Zentralbank Osterreich AG (Austria) and DZ Bank AG (Germany). In end-January this year, it was decided that IFCI will merge with PNB. Post-merger, PNB’s assets will increase to over Rs 1,01,000 crore from the Rs 86,000 crore as on end-March 2003. IFCI’s bad loans, which are estimated to be in excess of Rs 6,000 crore as on end-March 2003, will be transferred to an asset reconstruction company. It is also not clear at this point in time as to when the merger process will be through.
