India’s largest ever foreign currency bond issuance by RIL

Tags: Economics/Business

Reliance Industries Ltd.(RIL)  has  raised USD 4 billion  in India’s largest ever foreign currency bond issuance. 

• The issue was oversubscribed by three times and the money will be used by the company to retire its debts .
• The bond was issued in three tranches with a duration of 10 years, 30 years and 40 years .
• It is for the first time that any BBB rated Asian companies outside of Japan have issued a 40 years dollar bond .
• The interest rate (Coupon rate ) on the bond  is linked to the US Treasuries benchmark. On the 10 year bond it will pay US treasuries benchmark plus 120 basis points which workouts to be  2,875 %,for 30 years bonds it will pay 3.625%  and for 40 years it will pay  3.750%.

US Treasury papers 

 It refers to the debt paper issued by the government of the United States  to borrow from the market .

Treasury bills or( T bills)  : The debt paper issued by the US government which has a maturity of one year or less .

Treasury Bonds : The debt paper issued by the government of the US to borrow for a long term period .

 Benchmark : In finance benchmark means a standard which is used to compare others .  The US Treasury is considered as a benchmark in the world  debt market as it is considered almost risk free . Risk free means there is a certainty that the US government will repay its debt .

 The higher the risk of default the more interest the company has to pay while borrowing .So while borrowing  RIL had to pay the  US Treasury benchmark interest rates  plus 120 basis points  which works out to be   2,875 % for the 10 years bonds.

Basis points (BPS ):  It  refers to a common unit of measure for interest rates and other percentages in finance. 100 basis points is equal to 1%.