Reliance Seeks $500M Loan for Ethane Debt Refinance

Reliance Industries plans $500 million offshore loan for ethane transport subsidiary with 12-15 year tenor.

By Max Weldon

7/11, 04:45 EDT

Key Takeaway

  • Reliance Industries plans to borrow $500 million offshore to refinance debt, enhancing cost competitiveness in its ethane business.
  • Saudi Aramco raised $6 billion through a bond sale, with strong demand allowing for reduced spreads on 10-, 30-, and 40-year notes.
  • Yes Bank shares surged 8.5% amid interest from potential investors like FAB and Japanese banks, despite no confirmed stake sale approval.

Reliance Industries Plans Offshore Loan

Reliance Industries Ltd., India's largest company, is planning to borrow at least $500 million to refinance existing debt. This would mark the conglomerate's first offshore loan this year. The funds are intended for Ethane Crystal LLC, a subsidiary of Reliance Ethane Holding Pte., which is involved in the business of purchasing ships to transport ethane. The loan is expected to have a tenor of 12-15 years, according to sources familiar with the matter who requested anonymity due to the private nature of the discussions.

In 2016, Reliance Ethane raised a $572 million loan with a 12-year tenor to purchase six new ethane carriers. The longer repayment period of the new loan is anticipated to improve the cost competitiveness of Mukesh Ambani’s conglomerate. The ethane business has been a significant contributor to the company's profitability, particularly in the March quarter.

India's demand for ethane reached a record high earlier this year, driven by the country's efforts to boost its petrochemical capacity to meet the growing consumption of plastics. Reliance Industries operates one of the largest ethane transportation and cracker facilities, enabling the procurement of ethane from North America to its plant in Dahej, Gujarat.

In March, Reliance Ethane invested $102.9 million into three new subsidiaries to make part payments for contracting three new ships. This latest loan plan follows Reliance Industries' record borrowing in foreign currency last year. A company spokesperson did not respond to requests for comments on Thursday.

Saudi Aramco's Bond Sale

Saudi Aramco successfully raised $6 billion through a bond sale, attracting more than $31 billion in orders. This marks the oil giant's first dollar-debt offering in three years. The company sold 10-, 30-, and 40-year notes, with bids peaking above $11 billion for the 10- and 30-year notes and over $9.5 billion for the 40-year bonds. The strong demand allowed Aramco to cut spreads on each tranche by at least 35 basis points.

The details of the offering are as follows:

  • 10-year tranche: $2 billion, launched at 105 basis points over Treasuries, with peak orders exceeding $11 billion.
  • 30-year tranche: $2 billion, launched at 145 basis points over Treasuries, with peak orders exceeding $11 billion.
  • 40-year tranche: $2 billion, launched at 155 basis points over Treasuries, with peak orders exceeding $9.5 billion.

Aramco's spokesperson did not comment on the size of the transaction but referred to a company statement earlier in the week announcing the planned sale. The bond sale is part of Saudi Arabia's broader strategy to fund projects and cover an expected budget shortfall due to its ambitious economic diversification plan.

"Aramco is extending maturities as it will continue to gradually leverage up given their expansion plans and capex needs," said Apostolos Bantis, managing director of fixed income advisory at Union Bancaire Privee Ubp SA.

Aramco's free cash flow of $22.8 billion in the last quarter was less than its $31 billion quarterly dividend payout. The company has raised $16.5 billion from bonds since 2019 and plans to use the funds to refinance existing borrowings and support its investment program, including expanding natural gas production and pursuing acquisitions overseas.

Yes Bank Attracts Potential Investors

India's Yes Bank Ltd. has attracted interest from potential investors, including First Abu Dhabi Bank PJSC (FAB) and Japanese financial institutions Mitsubishi UFJ Financial Group Inc. (MUFG) and Sumitomo Mitsui Financial Group Inc. (SMFG). FAB is considering a bid for up to a 51% stake in Yes Bank, while the Japanese banks have shown preliminary interest, though their commitment remains uncertain.

Yes Bank shares surged as much as 8.5% on Thursday, marking the biggest intraday gain in almost a week. The stock has climbed about 25% this year, giving the Mumbai-based lender a market value of $10 billion.

First Abu Dhabi Bank stated, "FAB categorically states that it is not evaluating any possible offer for a stake in Yes Bank." MUFG and SMFG declined to comment, and a representative for Yes Bank did not immediately respond to a request for comment.

Yes Bank recently announced that it has not received any in-principle approval from the Reserve Bank of India for a 51% stake sale. State Bank of India, which rescued Yes Bank four years ago, remains its largest shareholder with a 24% stake. The potential deal could be delayed as SBI's chairman Dinesh Khara's tenure is due to end in August.