New CB loan US$ 100 mln short

The Central Bank has managed to convince two foreign banks to raise US$ 200 million through a bond issue to its coffers but has fallen short of its plan to raise US$ 300 million.

Five major foreign banks showed their willingness to raise such loans through various arrangements. A statement by the regulator's Public Debt Department earlier this week said that five foreign banks showed interest to raise US$ 300 million through numerous arrangements and Standard Chartered Bank (SCB) and Deutsche Bank were selected to raise different parts of it.

After considering the overall costs of the offers, effective margins, guarantee/commitment to provide funds, execution time period, underwriting ability, etc, SCB was selected to raise a syndicated loan of US$ 150 million on a three year maturity (with yearly put options).

The SCB is to raise this loan through a 'club arrangement' under which funds would be provided by a few identified major banks at the agreed rate and it would be 'permitted to upsize' the loan amount from US dollar 150 million upto a maximum of US$ 250 million 'depending on the investor appetite at the time of issue'," the statement said.

It went on to say that Deutsche Bank was mandated to raise US$ 50 million on a five year maturity. "In effect this means that presently SCB will raise US$ 150 million and Deutsche Bank US$ 50 million, which comes to US$ 200 million," an analyst said. He noted that depending on the investor interest the balance US$ 100 million will be raised.

"Right now it is difficult to raise the money. The country rating is negative. At the time of the US$ 500 million bond, we did not have such a rating and now inflation has nearly hit the quarter century mark. Also the government promised to cut subsidies and raise prices of petroleum, electricity, etc after the initial bond, none of which happened," he added.