Auto parts manufacturer Samvardhana Motherson International has successfully raised $350 million by issuing five-year bonds to international investors. The bonds, sold by its subsidiary SMRC Automotive Holdings Netherlands, were priced at 140 basis points above the five-year US treasury rate, currently around 4.30%.
This pricing resulted in a yield of 5.72% after accounting for all expenses. The funds raised will primarily be used to repay Motherson’s existing debt, which is due later this month, according to sources familiar with the matter.
The bonds are supported by a firm corporate guarantee from Samvardhana Motherson, as disclosed in a recent stock market announcement. “The final pricing of the bonds was tighter than the initial guidance of 175 basis points above the US treasury rate. The strong demand with a total order book of $2.20 billion allowed us to price the bonds inside the initial guidance,” said an insider involved in the transaction.
JP Morgan, MUFG, DBS Bank, and BNP Paribas were among the banks managing the bond issue. The raised capital will also go towards refinancing existing loans and bonds. “There is a 300 million euro bond maturing later this month, and this issue will primarily refinance it,” added another source.
Last month, Moody’s upgraded the long-term ratings of both Motherson International and SMRC Automotive from Ba1 to Baa3 with a Stable Outlook, citing improved profitability and cash flows. This move to investment-grade status reflects Motherson’s strengthened financial position and operational expansion following several acquisitions, noted Kaustubh Chaubal, senior vice president at Moody’s.
While Samvardhana Motherson has a history in the international bond market, this recent issuance marks its return after several years. Previously, in June 2016, the company had raised $300 million through a similar five-year dollar bond sale.
