IL&FS Transportation JV plans Rs890 crore bond issue to refinance debt

Mumbai: Jorabat Shillong Expressway Ltd, a joint venture between IL&FS Transportation Networks Ltd (ITNL) and Ramky Infrastructure Ltd, plans to raise around Rs890 crore through bonds, in a bid to refinance existing debt at a lower cost, according to three people aware of the matter.

The company is in talks with merchant bankers to issue bonds maturing in January 2031.

“The company has received strong investor interest at very competitive rates and it expects to complete the placement of bonds by November 2017. Once issued, the bonds would help the company achieve substantial savings in interest cost in the special purpose vehicle (SPV),” said Krishna Gagh, company secretary of ITNL.

Gagh did not comment on the amount of the proposed bond issue, stating that the final terms are yet to be decided.

The road project includes four-laning of Jorabat-Shillong section of NH-40 in the state of Assam and Meghalaya on design, build, finance, operate and transfer pattern under the Special Accelerated Road Development Programme in North-East SARDP-NE, according to information available on ITNL’s website. The scheduled projection completion date was January 2014.

The bonds are rated provisional AAA(SO), the highest investment grade by CARE Ratings, according to a 14 November release on the rating agency’s website.

Structured Obligations, or SO ratings, are assigned in cases where the credit profile of the underlying security has been upgraded because of strong parentage, and are supported by a structured payment mechanism.

CARE said that the proposed bonds derive strength from the credit quality of the underlying annuity receivables from NHAI along with proposed structured payment servicing mechanism.

ITNL has been regular in the bond market to refinance existing project debt in its matured SPVs.

Earlier this year, project debt worth Rs1,830 crore was refinanced through sale of bonds in its SPV-Jharkhand Road Projects Implementation Co. Ltd. In fiscal 2017, it completed refinance of project debt to the tune of Rs2,770 crore in its three SPVs, Gagh said.

These refinancing helped the company achieve interest rate reduction of 250-282 basis points.