ril: RIL set to raise $1.5 billion in overseas loans to refinance existing facilities

MUMBAI: Reliance Industries (RIL) plans to raise up to $1.5 billion in overseas loans to refinance some of its existing credit facilities as the company owned by Asia’s richest person seeks to reduce borrowing costs considerably.

The new facilities would cost up to 70 basis points less, saving on interest payments, several sources with direct knowledge of the negotiations told ET. The oil conglomerate is in talks with Standard Chartered Bank, Citigroup, State Bank of India, MUFG, HSBC and DBS Bank. The loan syndication will be launched in the next two to four weeks.

The refinancing talks come at a time when the Mukesh Ambani-owned company has raised nearly $22.48 billion through strategic investments from global companies in its units.

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RIL did not respond to ET’s request. Individual banks could not immediately be reached for comment.

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The loan will be used to repay the debt of Reliance Holding USA (RUSHA), a subsidiary that earlier this year merged with another unit, Reliance Energy Generation and Distribution Ltd., to simplify its corporate structure.

The National Company Law Tribunal approved the merger of the two subsidiaries in August.

“There are bank loans due in the next two months, which the company will refinance at a lower cost,” said one of the people quoted above.

The loan is expected to be priced at LIBOR (London Interbank Offered Rate), a global rate indicator, plus 95 basis points. The spread or differential was about 165 basis points in past loans. One basis point equals 0.01%.

About a month ago, the company raised around $1 billion, with the State Bank of India and MUFG together contributing around $600 million, ET reported on October 5.

The October loans were used to pay off the first round of high-cost debt, which were bond maturities. The second loan currently in progress will help pay off more expensive bank loans, sources said.

RHUSA raised its first dollar bonds in 2010, offering 4.5% with maturities of 10 and 30 years. The 10-year paper matured on October 20.

RIL chose loan syndication which takes less time to arrange than a conventional offshore bond sale.

Also, for loans, principal and interest must be repaid annually, unlike bonds, where only interest is paid annually.

RHUSA is the holding company for units that provide hydrocarbon exploration and production, petroleum refining and marketing, petrochemicals, retail and telecommunications services to customers worldwide.

“As the market begins to appreciate Reliance’s plans for new energy, its path to net-zero carbon, integration into chemicals and execution on last-mile consumer reach in retail, we believe that a regular revaluation similar to that of its global peers should be in the works,” Morgan Stanley said in a recent note.

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