Bharti Airtel raises about $2 billion in Dual Currency Bond sale
India’s largest telecom company Bharti Airtel raised around $2 billion in a dual currency international bond sale. It is the largest debt issuance by a domestic company till date. Bharti sold dual currency dollar and euro bonds to raise the money which will be used for repayment and refinancing of existing foreign currency debt. It is a first dual currency issuance by an Indian issuer and also largest fund raising exercise at a single time by an Indian issuer.
What are Dual Currency Bonds?
Dual Currency Bonds pay interest coupons in one currency and principal redemption for a fixed sum in a second currency, often the dollar.
A company may prefer issuing a dual currency bond to hedge any foreign exchange flows from its operations, or take a speculative view on currencies in order to get a lower cost of capital. Investors generally get an above-market coupon, but run the risk that, in this example, the dollar could plunge below the exchange rate used when the amount was fixed. Such bonds are enticing to borrowers who operate in the redemption currency because they have no long-term exchange rate risk.