The government backed infrastructure financier plans to raise at least $500 million by issuing 10-year dollar bonds in the next quarter to finance green and renewable projects in India, they said.
The credit guarantee will enhance the company’s rating above the current BBB and allow it to raise funds at a cheaper rate.
Big tech firms are borrowing heavily to fund AI data centers. This surge in debt issuance is raising concerns about the bond market’s capacity. While companies remain lightly leveraged now, the need for capital is shifting from cash to public bonds. Projections show AI capital expenditure will significantly increase, requiring substantial financing.
“The credit guarantee by the MIGA will help the NaBFID reduce the cost of issuing the bond by at least 50 basis points because of the guarantee. The debut issue will also pave the way for future such issuances as the company seeks to diversify its funding sources,” said one of the persons, who did not wish to be identified.
A basis point is a hundredth of a percentage point.
As part of its diversification plans, the company also plans to take a $250-500 million loan from foreign banks, according to the person. Both the instruments will help it spread its pool of resources which can be tapped in the future. Queries emailed to NaBFID CEO Rajkiran Rai did not elicit a response till press time, and a MIGA spokesperson said they could not immediately comment. A credit guarantee is an unconditional, irrevocable guarantee given by a stronger entity for the issuing company’s debt. It enhances the guaranteed debt’s rating to the same level as the guarantor’s rating, thus improving its creditworthiness and allowing it to raise funds at a cheaper rate.
“In the current scenario the NaBFID can raise 10-year dollar funds at about 150 basis points above the three-month SOFR (secured overnight financing rate). A MIGA guarantee will allow it to borrow at 100 basis points above this rate,” said another person.
The three-month benchmark SOFR is currently 4.22%, so the effective yield for the NaBFID will be around 5.22% for a 10-year bond. The company has already sanctioned green and renewable energy projects worth ₹60,000 crore, with projects worth another ₹40,000 crore in the pipeline.
