MUMBAI, July 13: The Industrial Credit and Investment Corporation of India (ICICI) is tapping the Yankee bond market to raise $150 million. The offering will have a maturity of 10 years.

ICICI sources said that the details of the issue are being finalised. The institution plans to tap the Yankee market as soon as all the formalities are cleared and the ratings come through. ICICI has approached both Standard and Poors and Moodys for a rating.

The finance ministry's clearance will not be required for the Yankee bond issue since ICICI has already obtained the nod for raising $ 500 million overall under its medium-term note programme. It has already raised $ 100 million in March 1997, which was used for increasing its Tier II capital to shore up its capital adequacy.

ICICI is now raising a 10-year paper without any bullet repayment. Thus far it has been depending on multilateral agencies like Asian Development Bank and the World Bank for raising long term loans to on lend to the infrastructure sector in India.

"Although the price will go up following the reduced dependence on multilateral agencies, it will be marginal", an ICICI source said.

"We think this is the most ideal time for us to tap the Yankee bond market with a 10-year paper. There is enough activity in the 10-year US Treasury market unlike the 30-year market where rates are ruling at a historic low of 6.5 per cent. Also there is enough appetite for a 10-year Indian paper in this market", the source said.

Merchant bankers point out that Telco's paper with a similar maturity was oversubscribed. "ICICI, which is government-owned, will get a much better response and a much better price", a merchant banker said.

Telco was able to raise $ 200 million at 168 basis points above 10-year US Treasuries which, if swapped in the international market, works out to be 130 basis points above Libor.

"We are looking at 110 basis points above Libor", an ICICI official said, adding that this will provide a benchmark for other Indian entities who will tap this market.

ICICI has decided to enter the Yankee bond market for long term funds partly because the government has slashed the external commercial borrowing limits of financial institutions for maturities below 10 years.

Under the recently issue ECB guidelines, borrowings above 10 years have been kept outside the annual ECB cap.

ICICI will be the third Indian entity after Reliance Industries and Telco to enter the Yankee bond market.

Tata Electric Companies is also seeking to raise $ 300 million through a Yankee bond flotation which will mature is 10 and 20 years.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.