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Sources say that India's ONGC will provide the first guarantee for 15 years to unit's bond sales.

Three sources familiar with the matter confirmed on Thursday that India's Oil and Natural Gas Corp. (ONGC), a state-owned company, had provided its first guarantee for 15 years to a rupee denominated bond. The bond is expected to be issued this quarter by a subsidiary.

ONGC Petro Additions Ltd. (OPAL), a company in which ONGC holds more than 95 percent of the shares, wants to raise 50 billion rupees (563.22 million dollars) via a multi-tranche bond issue, according to their report.

Sources who requested anonymity because they were not authorised by the media to speak on their behalf said that ONGC stepped up to increase its appeal to investors after Crisil rated OPAL's bonds as AA+ a couple of months ago.

The provisional AAA credit rating is now a result of ONGC's unconditional, irrevocable and unconditional guarantee.

The rating agency stated in a letter that ONGC would ensure OPAL's obligations are met in the timeframes specified.

This is the first time that ONGC has guaranteed bonds since January 2010, when ONGC Videsh Ltd., another subsidiary of ONGC, was backed.

OPAL has established a petrochemical plant in Gujarat in west India. It is now looking to raise money through a bond issue over five years. The company is also in discussions with large state-run investors who could act as anchors, giving other investors some confidence, according to another source.

Source: "In general, the issuer has pushed for very low coupons rates. However, investors are uneasy with exposure to lower yields. Therefore, issuance sizes have always been smaller."

OPAL will release the issue in this quarter once it has secured an investor.

A 'email seeking comment was not answered by either company.

OPAL currently has bonds outstanding worth 17.60 billion rupies. The last time it tapped into the bond market was 15 months ago when 1,60 billion rupees were raised through a bond issue of three-year bonds at 8.39%. $1 = 88.7750 Indian Rupees (Reporting and editing by Dharamraj Dhutia, Khushi malhotra)

(source: Reuters)