Mumbai: State-owned Union Bank of India has deferred its plan to issue medium-term notes as overseas investors are in a pessimistic mood in the wake of the Greek debt crisis, officials said on Tuesday.
Medium-term notes are promises to pay back a debt within a few years. The bank had said in January it planned to raise $300-500 million (Rs13,380-22,300) through medium-term notes that mature in five years.
Chairman M.V. Nair, along with the lender’s top management, went to London for a road show to convince investors to buy its bonds.
“We have completed our road show and have conveyed our credit position to investors, but we did not give any guidance,” treasurer S. Rajendran said from London. “We will come to the market soon. It could be one week, it could be one month...as soon as overseas sentiment becomes normal.”
Union Bank to defer bond issue on weak sentiment. Abhijit Bhatlekar/Mint
A person aware of the developments said on condition of anonymity that the bond issue has been deferred as investors were demanding higher returns.
But Rajendran said returns had not been discussed with investors, as the bank “did not start the book building process at all”.
Book building is a process that determines the price at which bonds and other fund-raising instruments are issued.
The lead arrangers for the programme are Standard Chartered Plc, Barclays Plc, Citigroup Inc. and Deutsche Bank AG.
Bank of India, Bank of Baroda and Axis Bank Ltd were recent Indian issuers of dollar bonds. They sold bonds with a maturity of five years and six months, with the former two paying a coupon of 4.75%.
Bank of Baroda had provided final guidance of 2.30-2.35% over US treasury bonds. Axis Bank priced its bonds at 2.75% over comparable US treasuries.
A Union Bank official told ‘Reuters’ it might have to pay a higher premium than recent issuers, but no decision had been taken so far.
(Jeanette Rodrigues of ‘Reuters’ contributed to this story)