Union Bank of India starts offering Swiss bonds

UBI targets to raise more than $129.5mln following concerns that Indian companies may face rising borrowing costs after selling $11bl of overseas bonds.

Union Bank of India on Thursday launched a Swiss franc-denominated bond in the first such offering by an Indian lender since 1988, reflecting the growing trend among local companies to look for niche investors in overseas debt markets.

The rush to find a new pool of investors follows growing concerns that Indian companies may face rising borrowing costs after selling $11 billion of overseas bonds in 2010. Indian companies have been increasingly borrowing in overseas markets as liquidity in the local banking system is tight and the central bank has been aggressively raising interest rates to tame surging inflation.

Union Bank plans to raise at least CHF125 million ($129.5 million) through the issue of the four-and-a-half-year bond, a person familiar with the matter told Dow Jones Newswires.

The state-run bank is seeking to pay a yield in the 200 basis-point area over the mid-swaps, the person said, asking not to be named.

Barclays PLC is the sole arranger to the issue, which is likely to be priced later this week, the person added.

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