Canara Bank hits overseas market with a $ 400-mn bond issue

07 Aug 2017

State-run Canara Bank has entered the international bond market with a $400-million (around Rs2,550 crore) issue, which is part of the lender's $2-billion medium term note programme.

The dollar bonds, to be issued through Canara Bank's London branch, will have a tenor of 5 years and the state-run lender plans to list the bonds on the Singapore Stock Exchange," reports quoting merchant banking sources said.

Canara Bank has priced its 5-year bonds at 150 bps over 5-year US Treasury yield.

The drawdown of the funds will be carried out by Canara Bank's London branch.

The Bangalore-based bank plans to raise a total of $2 billion (around Rs12,500 crore) in debt from the overseas market.

Rating agency Moody's has assigned aBaa3 rating for the debt issue, which is on par with the sovereign rating since the bank is majority owned by the government.

Moody's said in a note  the proposed senior unsecured notes, is being issued under the bank's $2 billion medium-term note programme.

Moody's said the bank's foreign currency senior unsecured MTN debt rating is anchored on its Ba3 baseline credit assessment and the agency's assessment of the likelihood of a very high level of government support in a stressed situation.

Although Canara Bank's asset quality rating of Ba3 is week compared to international lenders, it's gross NPA ratio compares favourably with its domestic peers that show an increase in bad loans.

The bank's bad loan provisioning levels are also comparatively lower compared with similarly rated state-owned lenders.

Fitch Ratings has assigned a rating of BBB- on par with the sovereign rating for the Canara Bank bonds.

Anil Agarwal-promoted Vendanta Resources has also entered the overseas bond market with a $1-billion sale to qualified institutional investors through private placement at a copoun of 6.125 per cent for a 7-year tenor.