Samvardhana Motherson raises $350 million via bonds

Auto parts maker Samvardhana Motherson International has raised $350 million by selling five-year bonds to overseas investors. The issue was priced on late on Wednesday.

The bonds were sold by a subsidiary, SMRC Automotive Holdings Netherlands, and are priced at 140 basis points above the five-year US treasury, currently trading at about 4.30%. After taking into account the costs, the bond was priced at a yield of 5.72%.

One basis point is a hundredth of a percentage point.

The funds raised will be used to refinance Motherson's existing debt maturing later this month, people familiar with the details said.

The bonds are backed by the unconditional and irrevocable corporate guarantee by Samvardhana Motherson, the company had said in a stock market disclosure last week.

“The final pricing of the bonds is tighter than the initial price guidance of 175 basis points above the five-year US treasury. The total order book for the issue was $2.20 billion which allowed the company to price its bonds inside the initial guidance,” said a person aware of the issue.

JP Morgan, MUFG, DBS Bank and BNP Paribas are among the bankers to the issue. Individual banks could not be contacted.

The money raised will be used to refinance existing loans and bonds. “There is a 300 million euro bond maturing later this month, and this will primarily be refinanced through this issue,” said a second person.

The company did not respond to ET’s email seeking comment.

Last month, global credit rating agency Moody’s upgraded the long term rating for both Motherson International and SMRC Automotive from Ba1 to Baa3 (Outlook Stable), citing improving profitability and cash flows. "The upgrade to investment grade reflects the continued improvement in SAMIL's credit profile due to the sustained strengthening in its financial metrics as well as its improved scale, diversification, scope and profitability following the integration of several acquisitions," said Kaustubh Chaubal, senior vice president at Moody's.

Samvardhana Motherson is not a stranger to the overseas bond market, but has tapped this source to raise funds after many years. In June 2016, it had raised $300 million through a similar five year dollar bond sale.