Shriram Finance plans $500 million bond buyback

Shriram Finance plans $500 million bond buyback

SEBI RA - Sunil Kotak - Shubh Consultancy - INH000015826 Mumbai: Shriram Finance is likely to announce a $500-million bond buyback as early as next week as it takes advantage of free cash flows and reduced borrowing costs after a rating upgrade due to the purchase of a 20% stake in the local non-bank lender by Japan's largest bank, Mitsubishi UFJ Financial Group (MUFG), earlier this year, people familiar with the plans told ET. The company proposes to buy back bonds maturing in April 2027 and April 2028 in an attempt to reduce borrowing costs and the buyback will be offered at a slight premium to the existing trading price, people familiar with the details said. The tender offer will be the first such buyback since MUFG purchased the stake earlier this year. "The 2027 bond has an outstanding of $750 million while the 2028 bond has $500 million outstanding. By restricting the buyback to only $500 million the company wants to ensure that there is enough demand for the buyback," said a person aware of the details. Both these bonds are trading at a price of about $101 and the buyback will likely be priced at $101.25, this person said. The 2027 bond is trading at a yield of 6.25% while the 2028 bond is trading at 6.12% yield. Shriram is aiming to save at least 75 basis points by buying back these bonds as these borrowings can be substituted with cheaper funds, people familiar with the details said. The company did not reply to an email seeking comment till press time. In April, Fitch Ratings upgraded Shriram Finance's long-term foreign and local-currency rating by one notch to 'BBB-' from 'BB+' following the completion of MUFG's agreement to acquire a 20% stake in Shriram Finance. All this is for information. This is not a buy/sell recommendation. Thank you, Technofunda24