The Housing and Urban Development Corp (Hudco) has raised 60 billion yen ($448 million) from three of the largest banks in Japan in what is a rare transaction for a government-owned company in that currency.
Mitsubishi UFJ Financial Group (MUFG), Sumitomo Mitsui Banking Corp (SMBC) and Mizuho Bank, three of the largest banking groups in Japan by assets, have come together to finance a rare loan for Hudco, people familiar with the development said.
Hudco builds mass housing projects in metro cities and finances construction projects.
“The five-year loan was priced at 70 basis points above the Tokyo Overnight Average Rate (TONAR), the interbank benchmark rate in, Japan. The funds will be swapped to the dollar and brought into India to use for domestic lending purposes,” said a person familiar with the deal. One basis point is 0.01 %.
The TONAR is currently quoting at 0.25%. After hedging, the landed cost of the loan is less than 7% which is cheaper than the domestic market for a similar tenure loan, said the person cited above.
“After hedging, the cost for Hudco would be approximately about 130 bps above the three-month benchmark SOFR (Secured overnight financing rate), which comes to less than 7% and is a good deal for the company,” said another person aware of the transaction.
Hudco did not reply to an email seeking comment. MUFG, SMBC and Mizuho did not reply to separate emails seeking comment.
The three Japanese banks are syndicating this loan to others in which banks from Taiwan and Singapore, among others, are competing for a share, the second person aware of the transaction said. “The Taiwanese banks work on small margins so a sovereign trade which is a low risk according to them makes sense at the same time diversifying their book with India credit,” the person said.
