UTI Bank to raise $195 million through bonds

Mumbai: UTI Bank will raise $150 million through foreign currency-denominated bonds for Tier II capital requirements in the second quarter (July-September 2006). The private sector bank also plans to raise $45 million through Tier I perpetual issue of foreign currency. The 15-year Tier II subordinated bonds, with a call option after 10 years, would be part of UTI Bank''s medium-term note programme.

UTI Bank''s board approved plans to raise funds through upper-end Tier-II bonds for its overseas programmes and a domestic issue of bonds for hybrid Tier-I capital amounting to Rs866 crore. While upper-end Tier-II bonds usually have a 15-year tenure, hybrid Tier-I capital is perpetual.

Barclays Capital, Citigroup and Deutsche Bank are the joint arrangers and joint lead managers for the subordinated debt issue.

Market sources said the coupon is expected to be 100 basis points higher after 10 years, if the call option is not exercised.

The rates are linked to London inter-bank offered rate (Libor) and the bank expects to save over 200 basis points in interest costs compared with the coupon rates (interest rates) prevailing in the domestic market, UTI Bank officials said.

Marketing of the bond issue will begin in Hong Kong, before moving on to Singapore and London. The issue is tentatively planned to close before the end of the week, market sources said.

UTI plans to use the capital to expand its international business. The bank at present has a branch in Singapore and representative office in Shanghai. UTI Bank plans to establish a presence in Dubai and Hong Kong.