The non-bank finance company promoted by Hero MotoCorp, has become the first Indian company to raise a secured overnight financing rate (SOFR)-linked syndicated loan, raising $350 million at 168 basis points above SOFR, a new international benchmark that has come into existence to replace the London Interbank Offered Rate or LIBOR from January 1.
A syndicated loan differs from a regular loan because it is underwritten by a few banks and then
marketed to other banks which bid for portions of the loan. The Hero FinCorp loan has been marketed to 200 international banks. Such loans are believed to provide greater validation of a borrower's credentials in the global banking system.
The UK's Financial Conduct Authority declared on March 5 last year that LIBOR would not be considered a representative rate from December 31. The Reserve Bank of India had instructed banks, through a circular issued on July 8 last year, to stop writing contracts in the LIBOR from December 31, in line with the global phaseout of that benchmark rate.
Hero FinCorp, which started off as an arm of Hero Honda to finance its dealers three decades ago, has evolved into an independent non-bank finance company. Hero MotoCorp and members of its promoter family, the Delhi-based Munjals, continue to be the dominant shareholder with a 70-75% stake in Hero FinCorp.
