Muthoot Fincorp Limited has announced the successful closure of Rs 125 crores covered bond issuance. Amidst the menace of liquidity crunch, MFL has been exploring alternate ways of funding through this covered bond issue that opened on March 5, 2020, and two successful Non-Convertible Debentures (NCD) public issues earlier in the current financial year.
With a CRISIL rating of AA+ (CE), the covered bonds are issued for a tenure of 28 months at an interest rate of 9.5 percent per annum payable monthly. With this issue, Muthoot Fincorp would now be able to reach mutual funds, pension and PF funds, insurance funds and wealth management funds, thereby providing access to cheaper funds and ability to raise long-term on-balance sheet funds. Vivriti Capital is the arranger for the issue
Thomas John Muthoot, Chairman – Muthoot Pappachan Group and Managing Director – Muthoot Fincorp Limited, said, “We are focusing on diversifying our funding sources and reducing the dependence on the traditional credit routes. While the covered bond market has a considerable size of around Euro 2.6 trillion globally, it is still in a nascent stage in India with only a handful of issuances till date. This issue enables us to open to a vast market that has an appetite for high rated bonds while reinforcing our resilience during the turbulent market conditions. We remain steadfast in our unwavering dedication to empower the common man and find innovative ways to help them in achieving their ambitions.”
Covered bonds are debt securities issued by a lender or financial institution and collateralised against a pool of assets that, in case of breakdown of the issuer, can cover claims at any point of time. Unlike asset-backed securities created in securitisation, the covered bonds can continue as obligations of the issuer; in essence, the investor has an option against the issuer and the collateral, sometimes known as dual recourse.