India’s leading clean energy company Greenko has raised $1 billion on Monday via an overseas bond issue, making it Asia’s largest green bond till date. It will also be the largest high yield corporate bond by a privately held company in the whole world.
The company obtained oversubscription one and half times higher than the actual size. According to investment banking sources marquee investors including Goldman Sachs, Blackrock, Fidelity, Manulife Insurance subscribed to the company’s latest debt paper, less than a year after its last offering.
The bond have been priced at 5.1% with five and seven-year maturities. Securities worth $650 million will mature in seven year while the rest liability will cease to exist in five years.
Both, US and Asian investors subscribed the papers each grabbing 40% of the issuance while European investors absorbed the rest. A quarter of the book was subscribed by 1st-time investors, including asset managers like Jupiter, added sources mentioned above.
With this, Greenko, rated two notches lower than the investment grade, has become the first private company globally to offer the largest sum via corporate bond-sale in the high-yield market. Moody’s and Fitch Ratings graded the bonds (P)Ba2 and BB-(EXP).
Upon closure, Greenko would have raised $2 billion of equity and debt from marque institutional investors in the last 12 months. It already has 2.5 gigawatts (GW) of operational portfolio of wind-, solar and hydro-power projects, making it one of the largest players in the country. By the end of the year, it plans to raise the capacity to 3 GWs. The operating portfolio is expected to generate $450 million EBITDA in FY17, sources in the know said.
Barclays, JP Morgan, Morgan Stanley, Deutsche Bank and Investec helped the company to raise the funds.
Company spokespersons were not immediately available for comments.
The proceeds will be used to refinance the company’s first dollar bond sale that fetched $500 million in 2014. Additionally, the sale will also help the company refinance the debt that it inherited along with the acquisition of the 350 MW India portfolio of the bankrupt Sun Edison last year.
The privately held company was started by two Hyderabad-based entrepreneurs, Anil Kumar Chalamalasetty and Mahesh Kolli. It counts Singapore’s GIC and Abu Dhabi Investment Authority (ADIA) as key shareholders. GIC owns a controlling 60% interest in the company and ADIA has close to 15%. The two founders own the rest. It was previously listed on London’s AIM exchange.
For this latest round of fund raising, the company is creating a new pool of around 1 GW (1000 MW) of its diversified portfolio into an SPV, technically classified as a “restricted group.”
“We project US$90-130bn of issuance in 2017 in our base-case scenario, which assumes 30-50% growth from China, and 15-30% growth from the rest of the world,” Bank of America and Merrill Lynch Global Research said in a report. It has estimated that issuance could be as high as US$150bn in a bull-case scenario.
“We are seeing increasing innovation and diversification within the Indian market.”
Many Indian clean-tech companies, such as ReNew, or banks or financial institutions like Axis, Rural Electrification Corporation have raised funds through this route in recent months, though the sizes of the issues were much smaller. Pension, endowments and foundations or long-only funds have always had the appetite for such paper but now even blue chip investment funds and asset managers from Blackrock and PIMCO have specific mandates from their investors to subscribe to such green papers. The interest from high net worth and retail clients is also rising.
“Deteriorating credit conditions for the US solar sector are a major focus of the overall bond market. Of the green bonds that have ratings, 96% are of investment grade,” said the BoML report.