Oil and Natural Gas Corporation Limited (ONGC)’s overseas arm, ONGC Videsh has reportedly raised a loan worth $500 million in foreign currency. As per updates, the ONGC Videsh’s foreign currency loan is from a consortium of banks.
According to a report in the Economic Times, the consortium of banks comprises of DBS, Bank of Baroda and State Bank of India. The foreign currency loan, denominated in dollars, for a tenure of five years, has reportedly been backed by ONGC’s guarantee. It has also been “benchmarked to three-month term secured overnight financing rate (SOFR).”
The report adds that ONGC Videsh has drawn this facility and used the funds gained to repay a $500 million bonds due that also matured the week before. Before this, ONGC’s overseas arm had also raised $800 million in bonds to meet its financing needs for a project in Azerbaijan in 2013.
However, since exposure of banks to these loans has also become a hot topic lately, the report mentions that out of the consortium, DBS has the highest exposure in the syndicated loan to ONGC Videsh.
With this loan, ONGC Videsh adds to the list of companies that have opted for external commercial borrowings (ECB). The publication also adds that borrowers tend to prefer instruments that can bring down their debt servicing costs, especially when interest rates start going down.