How Tata tapped the debt markets

Capital raising requires gumption and out-of-the-box thinking. Rebecca Abraham reports on a hybrid bond issue that showed both

New paths are being charted as Indian companies seek to take on more debt, often to repay existing debt, from sources other than banks.

In November 2014 Tata International, the global trading arm of the Tata Group, issued S$150 million (US$110 million) in perpetual bonds priced at 6.65%. The issue, which was done through Tata International Singapore, was the first perpetual bond issue by an Indian company in the Singapore debt market.

Perpetual bonds have no fixed maturity date. Indian companies that have issued them elsewhere include Ballarpur Industries – in April 2011 through a subsidiary in the Netherlands – and Reliance Industries in January 2013. Indian banks have also issued perpetual bonds.

The nitty-gritty of the Tata International issue was however unusual. In what may be a first for perpetual bonds issued in Singapore, the bonds were guaranteed by the Singapore issuer’s parent company, Tata International. Both companies are privately held and unrated.

“The guarantee was given by the Indian parent in order to link the Indian parent to the issuer,” explains Philip Lee, a Singapore-based partner at Herbert Smith Freehills, who led the team that advised the underwriter, HSBC, as the sole international counsel on the transaction. “The credit was the Indian parent.”