India Exim Sells Debut Formosa Bond as Taiwan Draws Issuers

  • Exim Bank joins Kookmin Bank, ABN Amro with Formosa floaters
  • Formosa floaters may offer pricing advantages: BNP Paribas

State-owned Export-Import Bank of India sold its first dollar bond in Taiwan’s Formosa debt market, joining Korea’s Kookmin Bank and Europe’s ABN Amro Bank NV so far this year to tap local investors demand for floating-rate debt that offers protection to buyers.

Overseas issuers have been able to obtain “some pricing advantages from Formosa floaters compared to the global Eurobond floaters,” according to Frank Kwong, head of primary markets for Asia-Pacific at BNP Paribas SA, which was a bookrunner on the ABN Amro deal. India Exim priced a $400 million five-year floater Monday at 100 basis points over three-month Libor.

“There is a decent pool of liquid capital available with the investors” in Taiwan, said India Exim’s deputy managing director David Rasquinha in a telephone interview Monday. “I see no reason not to go back to the Formosa market.”

Sales of floating-rate notes in the market rose to about $3.5 billion last year from almost none in the previous 12 months, and issuance this year is running at about $1.8 billion, as investors contend with rising U.S. interest rates. Taiwanese banks are participants in a lot of Asian loan deals and a slowdown in that market this year may mean lenders “need to buy some floating-rate notes to offset” that trend, according to BNP’s Kwong.

Issuers including Verizon Communications Inc., AT&T Inc and Citigroup Inc. have sold about $30.7 billion in bonds so far in 2017 in the Formosa market, little changed from the same period last year. U.S. telecommunications giant Verizon and others have sold 30-year bonds in the market, drawn by Taiwanese life insurers’ demand long maturities to match obligations that are decades away.

Mumbai-based India Exim’s dual-listed dollar bonds meant that the notes could also be bought by investors in Asia outside Taiwan. Formosa bonds are notes that are sold in Taiwan but denominated in foreign currency.

“We had done an investor update in June to meet Taiwanese and other Eastern markets investors, and got a feeling that there is demand from that market,” said India Exim’s Rasquinha. “We are opportunistic issuers. We are ready to tap any market that looks interesting.”

— With assistance by Annie Lee, and Divya Patil

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