Bharti Airtel has raised $1.25 billion through the issuance of its first ever dual-tranche US$ bond offering spread across senior and perpetual issuance.

This is the largest issuance by any Indian Investment Grade issuer since January 2019.

Airtel has priced $750 million of senior 10.25 year bonds at a yield of US 10 Year Treasury + 187.5bps for an implied coupon of 3.250 percent.

Network i2i, a subsidiary of the company priced $500 million in guaranteed subordinated perpetual NC 5.25 year bonds with a coupon of 3.975 percent. This is a lowest every yield on 10 year and Perpetual bonds for Bharti Airtel.

The proceeds of the proposed senior unsecured notes and subordinated perpetuals will be used to repay existing debt and for capex.

The telecom operator said the offering was significantly oversubscribed with strong demand from several Asian, European and American funds. The peak order book of over $5 billion at the time of final price guidance allowed the pricing to tighten significantly from Initial Price Guidance (IPG) on both tranches and allowed the company to meet its pricing as well as size objectives.

Airtel said the senior 10.25 year tranche was launched at IPG of 230bps over 10 year US Treasuries and eventually tightened by 42.5bps to price at 10 year US Treasury + 187.5bps. Similarly, the Perpetual NC 5.25 tightened by 37.5bps from its initial price guidance.

Fitch Ratings has assigned India-based Bharti Airtel Limited’s (Bharti, BBB-/Negative) proposed US dollar senior unsecured notes a ‘BBB-‘ rating and Network i2i Limited’s proposed subordinated perpetual notes a ‘BB’ rating.

Deal highlights:

Order-book from 92 accounts for the senior 10.25Y issuance and from 97 accounts for the subordinated perpetual bond.

Book very well distributed by region- Over 30 percent from APAC , over 45 percent from EMEA with the balance from US accounts.

Over 95 percent allocation of the senior bonds (and 93 percent in the case of the Subordinated Perpetual Bond )to asset managers, insurance companies and real money accounts with the balance to private banks, corporate, broker dealers and others

“The strong reception of both our senior and perpetual bonds by high quality global investor community reflects its confidence in our business and credit. We remain focused on keeping our balance sheet strong and these issuances further bolster our capital structure,” Ashish Sardana, group treasurer at Bharti Airtel said.

Airtel Capex

Fitch Ratings said it expects Airtel to generate small positive free cash flow (FCF) in FY21 on flat core capex, lower interest costs and the government’s two-year moratorium on the payment of existing spectrum dues, which will defer about $840 million in each of FY21 and FY22. Airtel’s FY22 absolute core capex will most likely be flat, ignoring one-time payments for spectrum assets.

Airtel will continue to invest in expansion of its 4G and fibre networks across Indian and African markets. Airtel is expected to spend USD500 million in FY21 and USD1 billion in FY22 to fund the upfront spectrum investments.

Airtel has completed the shutdown of its 3G network across India and has redirected its 900MHz and 2100MHz spectrum for 4G usage. Management has stated it will not participate in 5G spectrum auctions, at existing high prices.

Barclays, BNP PARIBAS, BofA Securities, Citigroup, HSBC, J.P. Morgan and Standard Chartered Bank acted as Joint Lead Managers and Joint Bookrunners, while DBS Bank Ltd. & SMBC Nikko were the Co-Managers on the trade.