Bank of Baroda to raise up to Rs 2,500 crore via Basel-III AT1 bonds on Aug 30

Bank of Baroda is planning to raise up to Rs 2,500 crore through Basel-III Additional Tier-I (AT1) bonds on August 30, a source close to the development told IANS on Friday.

The auction for the additional tier-I bond is expected to be held on August 30 on the BSE`s bidding platform.

The source expects there will be higher demand for the bonds from the investors considering the issuances taken place in few days where coupon has been set lower.

"On the upcoming AT1 bond of Bank of Baroda, we expect coupon to set between 7.80 per cent and 8.00 per cent," the source cited said.

On Monday, the capital raising committee of the bank had approved issuance of Basel-III compliant additional tier-I bonds for aggregate total issue size of Rs 2,500 crore in single or multiple tranches.

AT1 bonds, also known as perpetual bonds, do not have any fixed maturity and are billed as quasi-equity, a risker security. Most of such securities have a five-year call option, an exit option for investors provided the borrower exercises it.

Market participants said there will also be strong demand from the insurance companies after the insurance regulator allowed insurers to buy more perpetual bonds issued by banks.

Earlier this month, the Insurance Regulatory Development Authority of India (IRDAI) has allowed isurance companies to buy more perpetual bonds issued by banks and permitted them to participate in the public listing of high-yielding InvITs (Investment Trusts). These are subject to certain conditions.

"The aggregate value of AT1 (additional tier one) bonds held in a particular bank, at any point of time, shall not excess 10 per cent of the total outstanding AT1 bonds of that particular bank," IRDAI said in a note.