REC Limited, a public infrastructure finance company in India’s power sector, has raised a $75 million five-year secured overnight financing rate (SOFR) linked syndicated term loan. Sumitomo Mitsui Banking Corporation (SMBC), Singapore Branch, is appointed as the sole mandated lead arranger and bookrunner.
According to REC, this is the first SOFR linked term loan for any non-banking financial company (NBFC) in India. It also maintains that the interest rate swap referencing it entered into is the first such deal by any corporate in India.
Along with the loan, REC has also entered into an interest rate swap referencing SOFR to hedge the interest rate risk on this facility. The proceeds from this facility will be utilized to fund infrastructure power sector projects as permitted under the ECB guidelines of the Reserve Bank of India.
“With the imminent cessation of LIBOR and following the notification from the Reserve Bank of India on a roadmap for LIBOR Transition, we are delighted to raise this SOFR linked Term Loan Facility, which is also the first one by any NBFC in India. The experience gained from the process will enable REC in USD LIBOR transition to SOFR for our existing term loans in a better manner,” said Sanjay Malhotra, Chairman and Managing Director, REC.
REC Limited is a NBFC focusing on power sector financing and development across India. It provides financial assistance to state electricity boards, state governments, central and state power utilities, independent power producers, rural electric cooperatives, and private sector utilities.
Last year, the company received the approval to raise its overall borrowing limit to ₹4.5 trillion (~$60 billion). The foreign currency borrowing allowed is equivalent to $12 billion (~₹884 billion).
“We are pleased to partner with REC for our first SOFR linked ECB facility in India and for providing the solutions for interest rate risk management. As a leading player in the syndicated loans and ECB market, SMBC is committed to working with Indian PSUs and corporates using the new interest rate benchmarks,” said Rajeev Kannan, Managing Executive Officer and Deputy Head, SMBC Asia Pacific Division.
REC recently sought shareholders’ approval to raise ₹850 billion (~$11.63 billion) through the private placement of bonds or debentures. The company plans to raise funds in one or more tranches within a year from the date of passing the resolution.
In February 2021, REC raised $500 million through a bond issue under its $7 billion Global Medium Term Notes program. The notes are expected to bear interest at the rate of 2.25% per annum and mature on September 1, 2026. The proceeds from the sale of notes will be used for lending to the power sector in line with the external commercial borrowing regulations and directions of the Reserve Bank of India.