Reliance Industries has exercised its 'call option' on the Rs 12 bn Panna-Mukta-Tapti (PMT) oil and gas receivables and pre-paid its entire dues to lenders ICICI and SBI.
The pre-payment exercise was prompted by easy liquidity conditions and firming up of crude oil prices in the international markets. A Relaince spokeperson has confirmed the pre-payment. The above move will result in reduction of around 300 basis points in interest costs for Reliance on Rs 12 bn which works out to Rs 3-4 m every year. The deal worth Rs 12 bn and having a maturity of 15 years was picked up by ICICI (Rs 10 bn) and SBI (Rs 2 bn). Banking sources informed the ET that the pre-payment was done through a combination of internal accruals and money raised in domestic markets at lower rates.
Though the pre-payment sounds good for Relaince, it means bad news for ICICI and SBI who will now be straddled with Rs 12 bn of funds in an increasingly narrow high quality borrower's market.
Reliance had raised the quasi-equity PMT financing in an innovative deal last year. Inder the deal, the future PMT oil and gas receivables from Indian Oil and Gas Authority of India for a period of 15 years - who has committed to buy the proceeds from operations - has been assigned to a trust set up by ICICI by Reliance. Against this, Reliance received an upfront payment of RS 12 bn from the trust, which then issued monthly pass-through certificates to the investors (ICICI and SBI) at a discounted price.
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