Birla Carbon likely to raise up to $1.5 bn via offshore bonds

MUMBAI: Birla Carbon, an Aditya Birla group company, is raising up to $1.5 billion through its maiden overseas bond sale, said four people with the direct knowledge of the matter. The maker and supplier of carbon black additives will use the proceeds to refinance an old offshore loan to reduce annual bulk debt obligations.

The company is expected to meet a group of bankers in Atlanta in the next few weeks as US Treasury yields are dropping this month, lowering global funding costs. It is in the process of appointing investment bankers.

The US benchmark treasury yield, a key gauge for pricing global bonds, has dipped 13 basis points this calendar year until Wednesday.

“It is more comfortable to pay yearly interest instead of repaying principal and interest against any loan at one go,” said one of the persons involved in the exercise.

In July-August 2018, the company had raised $1.2 billion through a syndicated offshore loan. Last year too, it raised $1.5 billion via the same route. Those were relatively shorter-duration loans.

Last year, the firm also acquired Swiss Singapore Overseas Enterprises for $450 million, the majority of which was debt-funded. This reportedly led to higher leverage.

Birla Carbon did not respond to ET’s email seeking comments until publication of this report.

The proposed bonds, which will be sold to global investors including those from the US, would have maturities in the range of five-10 years.

While the company aims to raise long-duration money, it would be hitting overseas bonds for the first time with high-yield grade, which will be below India’s sovereign rating rank.

“On a debut, a high-yield issuer is unlikely to raise seven- or 10-year money as bond investors, billed as sustainable investors, do not repose full faith in the first shot,” said an investment banker.

“The refinancing will likely take place in the US only, eradicating the need for hedging, which in turn helps save costs,” said another investment banker in talks with the company.

Birla Carbon India nearly trebled its operating profit to Rs 531 crore as of March 31, 2019 from Rs 183 crore a year earlier, shows Bloomberg data.

As one of the flagship businesses of the $48.3-billion Aditya Birla Group, it provides global innovative sustainable carbon black solutions that enhance the performance of paints and coatings, inks and toners, plastics, adhesives, textile fibres and tires.

Back in 2011, Birla Carbon had acquired Columbian Chemicals Company, for which it changed the name to Birla Carbon USA last year.

Globally, sovereign papers worth $11 trillion are yielding negative returns. This means that investors pay for the privilege of owning such debt, which is perceived to be safer.