DLF in talks with StanChart for $300m loan at 7%

DLF in talks with StanChart for $300m loan at 7%
The Economic Times, June 24, 2009, Page 4

Sanjeev Choudhary NEW DELHI

INDIA’S largest real estate firm DLF is close to raising $300 million by way of a foreign currency loan at a rate significantly lower than what it would have to pay in the domestic market, a top company executive told ET.

The company is raising the loan from Standard Chartered Bank at an interest rate of around 7%, as against its current average borrowing cost of 12.5% in the domestic market, said the executive who asked not to be named.

The 7-year loan is being raised at a rate of Libor plus 500 bps. The loan will be used for one of the integrated township projects of DLF. The realty firm is developing around half-a-dozen townships, but it could not be immediately ascertained which project this fund will be deployed.

A DLF spokesman declined to comment. Stanchart India too declined to comment, citing “confidentiality reasons”.

The loan will be through the external commercial borrowings (ECB) route. Current central bank rules permit such overseas loans to be raised only for integrated township projects.

The Reserve Bank of India (RBI) had permitted real estate companies to raise funds through the ECB window for integrated townships late last year to boost activity in the housing sector in the light of a serious liquidity crunch at home.

But the seizure in the international credit market in the aftermath of the collapse of US investment bank Lehman Brothers last September meant overseas markets were not available for fund raising.

DLF, which had net debt of Rs 14,000 crore at the end of March, has been raising long-term loans in the domestic market to replace shorter duration debt. Since December last year, it has raised at least Rs 3,000 crore of long-term debt from a clutch of state-run banks and insurance major LIC at an average borrowing cost of 14%.