Reliance Industries is understood to have raised $736 million through a green loan facility to finance the Mukesh Ambani-controlled firm’s acquisition of Norwegian solar panel manufacturer REC Solar Holdings in what could be the first such M&A financing from an Indian firm.
Australia and New Zealand Banking Group, DBS Bank, Credit Agricole, HSBC and MUFG were among the bankers to this rare facility, which is being used for acquisition financing for the first time.
The debt facility will have an interest margin of around 120bps–125bps over Libor. The debt facility was taken under Singapore-incorporated REC Solar, and is secured against guarantees from Reliance New Energy Solar, a wholly-owned subsidiary of Reliance Industries.
The loan facility consists of a $250 million six-year term loan and a $150 million working capital facility, while another $460 million five year bank guarantee facility.
A mail sent to Reliance Industries remained unanswered until the publication of the report. Individual banks were not immediately available for comments.
On October 10, Reliance signed a definitive agreement to buy Norwegian solar manufacturing company REC Solar for an enterprise value of $771 million from its owners China National Bluestar (Group) Co Ltd. The same day, Reliance also announced the acquisition of 40 percent stake in SP Group company, Sterling and Wilson Solar.
Earlier this year, Mukesh Ambani told Reliance shareholders that the company aims to turn net carbon zero by 2035, and announced huge investment plans in the alternate energy sector.
The leveraged acquisition is on the rise in India as private equity funds are increasingly adopting a method of acquisition financing against the balance sheet of the target entity. IN July, Blackstone and its co-investors including Abu Dhabi Investment Authority, GIC and the University of California Investments raised $1.1 billion to finance their $2.9 billion acquisition of Mphasis.
Mergers and acquisitions involving Indian companies hit a three-year high during the first nine months of 2021, according to data compiled by Refinitiv. Between January to September this year, transactions worth $90.4 billion were announced, representing an increase of 35.1% compared to the same period a year ago, the data showed.
Source: Economic Times