19 March 2024 – Underpinned by strong investor demand for the debt being sold by India’s second-biggest non-bank lender, Shriram Finance on Monday raised $300 million in a first-of-its-kind transaction through an international transaction model using asset–backed securities (ABS) at a lower interest rate than the initial guidance.
According to people with knowledge of the developments who spoke with ET, Shriram Finance raised the money by securitizing a portion of its loan portfolio and then selling it to foreign investors dispersed throughout Asia.
The deal, which had a 6.5-year maturity, was priced at 5.85%, which was less than the initial pricing guidance of 6.15%, according to the sources. HSBC, Standard Chartered Bank, Barclays, Deutsche Bank, and JP Morgan were among the arrangers for the deal. At the time of publication, emails submitted to the other banks had yet to be answered, and HSBC and Standard Chartered Bank had declined to comment.
Conclusion
According to a second source, the structure of the ABS transaction benefits the issuer, Shriram Finance, by improving its credit rating. The model involved an offshore company buying an onshore ABS and using a foreign exchange swap to convert it to US dollars.
