Moody’s Investors Service has assigned a Baa3 rating to the proposed senior unsecured notes to be issued by the firm. The rating outlook is stable, Moody’s stated.

UPL is looking to tap the overseas dollar bond market, with the company intending to use part of the bond proceeds towards debt repayment while keeping the remainder to shore up its liquidity amid the challenging operating environment. With this, UPL could be the first Indian private firm to tap the overseas bond market post the Covid-19-led halt in foreign fund-raising by Indian issuers.

Moody’s Investors Service has assigned a Baa3 rating to the proposed senior unsecured notes to be issued by the firm. The rating outlook is stable, Moody’s stated.

“The firm could be looking to raise anywhere close to $500 million via bonds having a tenor of about 10 years,” said a banker aware of the deal. According to Bloomberg, UPL has also invited eligible holders of its outstanding $500 million 3.25% notes due in 2021 to tender the notes for purchase by the firm.

Kaustubh Chaubal, vice-president and senior credit officer at Moody’s, indicated in a note that the proposed dollar bond issuance comes at a time when the pandemic could lead to elongated working capital cycles, cause some supply disruptions and reduce free cash flow generation during fiscal 2021.

“This could lead to an increase in gross debt levels and slow the company’s deleveraging. Even so, we view the proposed transaction as a liquidity booster and a reflection of UPL management’s proactive approach to liability management and prudent financial policies,” Chaubal said.

Prior to this, REC had raised funds via dollar bonds last month. FE had reported earlier that REC could be the first firm to hit the overseas bond market post the crisis-led halt.

In the first two months of 2020, abundant liquidity available across the globe, fresh allocations at the beginning of the year and a fall in the US treasury yields had helped Indian issuers rush to the overseas bond market where costs were down. Indian firms and banks raised a whopping $7 billion-plus from the foreign currency (FCY) bond market this year, according to market sources.

Exim Bank and Adani Electricity Mumbai raised a billion dollars each this year from the FCY bond market. Other entities that hit the overseas bond market this year include Manappuram Finance, Shriram Transport, Future Retail, Power Finance Corporation and IRFC, among others.