Reliance Jio set to raise $1.5 bn to refinance loans

Mumbai: Reliance Jio Infocomm Ltd (RJIL), the telecom unit of tycoon Mukesh Ambani's Reliance Industries Ltd, is raising a combined $1.5 billion from more than two dozen overseas banks to refinance loans taken in 2010 and guaranteed by the parent firm.

The money has been secured at "significantly better terms" than in 2010, Reliance Jio said in a statement on Monday. It will comprise a $1 billion tranche maturing in five-and-a-half years, and a $500 million facility that will mature in seven years-"the longest average maturity for an unsecured syndicated loan of similar size in Asia this year", RJIL said.

A total of 26 banks participated in the deal, including 15 mandated lead arrangers and book runners (MLABs), namely Australia and New Zealand Banking Group Ltd (ANZ), Bank of America N.A., Barclays Bank Plc., BNP Paribas SA, The Bank of Nova Scotia Asia Ltd, The Bank of Tokyo-Mitsubishi UFJ Ltd, Citigroup Global Markets Singapore Pte. Ltd, Crédit Agricole Corporate and Investment Bank, DBS Bank Ltd, The Hongkong and Shanghai Banking Corp. Ltd (HSBC), Mizuho Bank Ltd, The Royal Bank of Scotland Plc, Standard Chartered Plc, Sumitomo Mitsui Banking Corp. and Westpac Banking Corp.

"Reliance has a relationship with many global and local banks and all banks have queued up to finance this loan. This loans will be backed by the parent RIL. The company has already got a letter of commitment from banks and it is likely that the loan money will flow to the company within a month," said a person related to the deal, requesting anonymity because some terms of the deal are not public.

National Bank of Abu Dhabi P.J.S.C. and United Overseas Bank Ltd also participated as lead arrangers, while Abu Dhabi Commercial Bank, Societe Generale SA, Sumitomo Mitsui Trust Bank Ltd, Land Bank of Taiwan, Mega International Commercial Bank Co. Ltd, Bank of Taiwan, CTBC Bank Co. Ltd., The Iyo Bank Ltd and The Hyakujushi Bank Ltd were the banks that joined in at the syndication stage.

A second person close to the deal said the money is being raised at around 160 basis points above the three-month or six-month Libor (London interbank offered rate), an international benchmark rate. "There are no Indian banks because Reserve Bank regulations prevent them from lending for refinancing loans," the person said. One basis point is one-hundredth of a percentage point.

This is RJIL's second funding deal within two months. On 24 September, the company signed a $750 million loan backed by the Korea Exim Bank and also guaranteed by parent RIL, but "primarily used to finance goods and services procured from Samsung Electronics for the infrastructure roll-out of RJIL," the company had said in a note on its website. Eleven other foreign banks had funded the loan.

At RIL's annual general meeting (AGM) earlier this year, chairman Ambani had said the company will spend Rs.70,000 crore to roll out 4G services through RJIL, which would raise RIL's overall debt 33 times. But Ambani said the company expects to be debt-free by 2017-18.

"It is fairly understandable that Reliance Jio would raise more loans, as the company wouldn't want to fund its entire 4G roll-out cost through equity alone," said a consultant who requested anonymity because he works with the company on some projects.

"One of the main reasons the company may be looking to raise loans is because it is planning a bigger launch than it originally envisaged-it was thought the company would roll out 4G in Mumbai and Delhi only, to begin with, and expand to other metros and smaller towns later," he added. "However, as per the AGM announcement in June, in the first phase, the company will be launching 4G services in 5,000 towns and cities and 215,000 villages in India, with a target to expand to 600,000 villages," the consultant said.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.