ONGC Videsh raises $500 million loan

15 May 2023 , 08:05 AM

According to news reports, ONGC Videsh, the Oil and Natural Gas Corporation’s overseas division, has secured a $500 million foreign currency loan from a group of banks that includes DBS, Bank of Baroda, and State Bank of India.

According to them, the five-year, dollar-denominated syndicated loan is benchmarked to the three-month term secured overnight financing rate (SOFR) and is supported by an ONGC guarantee.

One of the reports stated, ‘It came at a very competitive rate,’ without going into further information regarding the cost of borrowing.

In order to settle the $500 million in bonds that matured last week, ONGC Videsh drew from the facility. In 2013, the business obtained $800 million in bonds to cover its funding requirements for the ACG project in Azerbaijan. The remaining $500 million in bonds with a duration of 10 years has matured, while the $300 million in bonds with a term of 5 years did so in 2018.

Among the three parties involved in the syndicated loan to ONGC Videsh, DBS has the biggest exposure. According to the reports, the lenders want more banks to join the consortium and have started the primary syndication of the facility, which is anticipated to close by the end of July. This has been the subject of roadshows in Singapore, Tokyo, and Taipei.

ONGC Videsh is one of the few Indian businesses to have recently taken out external commercial borrowings (ECB). Lenders in international markets are paying more attention to Indian borrowers as the Chinese downturn has reduced their lending prospects, according to a person familiar with the ECB market.

Over the past year, interest rates have substantially increased as central banks around the world attempted to combat inflation. The world may be approaching the apex of the interest rate cycle, according to recent data on inflation and words made by central bankers. When interest rates start to decline, borrowers tend to favor instruments that can lower their loan servicing expenses. Bonds have a fixed interest rate but bank loans typically have benchmarks that rise and fall with the overall interest rate cycle.

A 2.72% interest in the ACG project in the Caspian offshore was purchased by ONGC Videsh in 2013; the company has participating interests in 32 oil and gas properties across 15 nations. Following the extension of the field’s production-sharing agreement in 2017, the firm’s stake was reduced to 2.31%.

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