Bank of Baroda raises $700 million in first overseas bond issue since 2019

Synopsis

Bank of Baroda raised $700 million through three-year and five-year dollar bonds, marking its first overseas issue in over seven years. Strong investor demand helped tighten pricing, with proceeds aimed at leveraging RBI’s special swap window.

Bank of Baroda’s $700 million overseas bond sale drew strong demand, allowing tighter pricing as the lender taps RBI’s special swap window for funding.

State owned Bank of Baroda (BoB) has raised a total of $700 million by issuing twin three year and five year bonds to foreign investors. This is BoB's first overseas bond issue in more than seven years.

The bank raised $400 million through the three year bond which was priced at 90 basis points above the three year US treasury, tighter than the 120 basis points above treasury price guidance. One basis point is 0.01 percentage point.

Another $300 million was raised by selling five year securities at 100 basis points above the five year US treasury, tighter than the 130 basis points initial guidance.

"The three year bond is priced at 5.11% while the five year bond was priced at around 5.32% coupon. The total peak order book was about $2.7 billion with demand from many real money investors like asset managers and pension funds," said a person familiar with the deal.

A BoB spokesperson did not reply to an email seeking comment.

BoB will issue these bonds through its branch in the International Financial Services Centre Banking ‌unit at GIFT City

BoB's issue came just a day after its larger peer, State Bank of ‌India raised $500 million through a five-year issue at ‌5.25% coupon payable semi-annually. The issue was sold at a spread of ‌88 bps over the five year US treasuries.

BoB had last issued an international bond back in April 2019 when it raised $300 million by issuing five year bonds at 3.87%.

Just like its other banking peers, BoB has raised these funds to take advantage of the special swap window announced by RBI.

Banks are likely to use these funds to provide loans to their wealthy overseas clients who in turn will use them to make deposits under the special FCNR (B) scheme in which RBI fully funds the hedging cost.

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