Mumbai, Feb 27: The Rs 200-crore Dena Bank subordinated debt issue has cast a shadow on the Rs 60-crore issue of Syndicate Bank. The Manipal-based Syndicate Bank has entered the debt market with a Rs 60-crore issue priced at 13.50 per cent. This is 75 basis points below the coupon offered by Dena Bank for its Rs 200-crore issue which is currently in the market.Syndicate Bank is raising tier-II capital to meet capital adequacy requirement for the financial year ending March 1998. The issue which is being lead-managed by ICICI Securities (I-Sec), the trading arm of JP Morgan and ICICI, has a seven-year tenure with no call and put option. The issue has a bullet repayment after seven years."Syndicate Bank is offering 12.5 per cent for short-term deposits. It is difficult to sell a seven-year issue at 13.5 per cent. Moreover, this is unsecured debt," a merchant banker said.
Syndicate Bank is aiming at raising Rs 60 crore. It will exercise the option of retaining any oversubscribed amount. The issue is unratedwhile Dena Bank's issue has been rated with a double-A (AA) from Icra.
Dena Bank's debt tenure, with a 63-month maturity, was opened for subscription on Monday. "It is an interesting scenario... two public sector banks are battling it out in the debt market to raise tier-II capital at the same time," an analyst at a brokerage house said. Despite the low coupon rate, Syndicate Bank issue has been able to raise funds with a number of banks, financial institutions and a few corporates have been tied up for the issue.
The Dena Bank issue is eliciting favourable response. According to sources at merchant banks, the issue has already mopped up Rs 75 to 100 crore.
"Wholesale investors are picking the Dena Bank issue. At 14.25 per cent it is a good buy, specially at a time when the interest rate scenario is uncertain," a source said.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
