Tata Teleservices Limited’s Rs9.7bn 6.45% bond due 2011
Barclays Capital, Union Bank of India and UTI Bank were mandated lead arrangers
Tata Teleservices, the largest fixed-line and wireless telecoms provider in India, issued its debut debt offering, one of the first issues to come to the domestic debt capital markets from a privately-held Indian telco. The bonds are structured as partially credit-wrapped debentures, in which the credit enhancement is provided by two guarantees: an onshore guarantee for 30% of the issue amount by the sponsor Tata Sons Ltd (rated AAA domestically) and a cross-border guarantee for 30% of the issue by Barclays Bank.
The deal was highly innovative. The transaction was the first partially guaranteed bond in the domestic market. It sought to achieve the most cost-effective outcome by securing a high investment grade rating – which it did by reducing potential loss to investors in a default scenario – and achieving risk mitigation through innovative risk distribution, where the credit risk of the issuer was distributed across all parties. The result was 50% oversubscription and the lowest ever coupon on a domestic bond.
