Reliance Industries Ltd. (RIL), operator of the world’s biggest oil refinery complex, plans to borrow $1.75 billion by mid-August to refinance debt and fund capital expenditure, according to two people familiar with the matter.
The facility may be drawn in U.S. and Singapore dollars, Euro and Japanese yen, and proceeds will help to refinance $1.2 billion of multicurrency loans signed in 2008, the people said, asking not to be identified because the details are private. Some $550 million of new money denominated in U.S. dollars will be raised for capital expenditure.
Reliance plans to spend 1.5 trillion rupees ($24.6 billion) over the next three years to expand businesses ranging from natural gas to petrochemicals and telecommunications, its billionaire Chairman Mukesh Ambani told shareholders in June. The company borrowed about $5.4 billion overseas through bonds and syndicated loans in 2012, Bloomberg-compiled data show.
“Reliance possibly anticipates future interest rates rising with the quantitative easing tapering off, and they’re locking in rates now,” said Neelabh Sharma, a Mumbai-based analyst with BOB Capital Markets Ltd., a unit of state-run Bank of Baroda, which rates the company’s stock as a hold. “They want to stay cash rich which helps them raise money at cheaper costs to finance expansion projects.”
Tushar Pania, a Mumbai-based spokesman for Reliance, declined to comment on the company’s financing plans.
Reliance sent requests for proposals to banks last week and has asked for responses by Aug. 2, the people said. The company expects to have an underwriting bank group in place by mid-August, the people said.
The tenor for the U.S. dollar-equivalent $1.2 billion facility will be five years and six for the about $550 million loan, the people said.
Reliance, India’s 11th most indebted company, has $20.1 billion equivalent of bonds and loans outstanding, according to data compiled by Bloomberg. The company raised $800 million selling 5.875 percent senior perpetual notes in January, the data show.
Some of the debt the company is seeking to refinance is paying an interest margin of 130 basis points more than the London interbank offered rate, Bloomberg-compiled data show.
Reliance Industries shares fell 0.7 percent to 851.8 rupees as of 1:49 p.m. in Mumbai.
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