Jurisdiction - Singapore
Herbert Smith Freehills Advises On Tata Motors USD 750m Bond Offering In Singapore

5 November, 2014


Herbert Smith Freehills has advised the joint lead managers and joint bookrunners on Tata Motors Limited’s USD 750m dual-tranche fixed rate bond offering. The deal represents the first bond offering by an Indian corporate to take advantage of the new 5% withholding tax on foreign currency bond issuances by Indian entities.


The Regulation S-only offering, which comprised a USD 500m 4.625% 5.5-year tranche and a USD 250m 5.75% 10-year tranche, took advantage of positive market conditions to effectively re-open the Asian G3 high-yield markets amidst global economic uncertainty. The notes were rated Ba2 (stable) by Moody’s and BB (positive) by Standard & Poor. The notes are listed on the Singapore Stock Exchange.


The offering received an exceptional order book, reflecting high levels of demand for quality Asian high-yield paper.  Market reporters have shown that the 5.5-year tranche received an order book of USD 4.2bn from approximately 350 accounts, and the 10-year tranche received an order book of approximately USD 350m from more than 30 accounts across Asian and European investors.


With effect from 1 October, the withholding tax rate on bonds issued by Indian incorporated entities was reduced to 5% from 20% previously. Prior to 1 October, only Indian infrastructure companies were able to tap bond markets at an effective 5% rate of withholding.


The Herbert Smith Freehills team was led by partner Philip Lee, advising ANZ, Citi, Credit Suisse and Standard Chartered Bank. Partner Alexander Aitken advised Citicorp as trustee for the bondholders.


Philip Lee commented:


“This is a truly meaningful reform which is likely to provide more Indian corporates with the opportunity to access international debt capital markets. Previously, the 20% withholding tax rate would add to the overall cost of capital as issuers would have to factor in the obligation to gross up investors under the terms of the notes. This made international currency debt capital markets prohibitively expensive for Indian issuers who did not have substantial assets and cash flows outside of India on which they could rely to meet their obligations to bondholders.”


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