India’s Top Builder Sweetens Bond Offer Terms in Unusual Move

(Bloomberg) -- In an unusual move, India’s top builder has sweetened the terms of a pivotal debt offering that it needs to complete successfully to avoid a default.

Mumbai-based Lodha Developers International Ltd., the country’s largest residential real estate developer, is now offering to pay 14% to investors for a bond it’s hoping will bring in as much as $225 million. That’s up from initial guidance that was in the 13% area.

Usually when a company markets a debt security, the underwriters that help execute the deal start with higher initial guidance and move down from there. Given how hot the credit markets have been, at least until the recent disruption from the coronavirus, strong demand for deals has allowed the arrangers to deliver lower coupons to the issuers by the time the security actually prices.

But Lodha’s case is unique and the broader bond market has been weaker recently. The company is trying to secure buyers for the new note, which is key for it to refinance about $324 million of existing notes maturing March 13.

Lodha’s race to sell the new bond comes as Indian real estate developers have been grappling with slowing demand and a tight local funding market, as economic growth slumps and a lingering credit crisis constrains spending.

Even if it sells the new securities, the company needs to meet conditions involving setting aside cash before it can tap the proceeds. Read more about those conditions here.

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