4 April, 2017
Allen & Overy has advised Goldman Sachs, HSBC, J.P. Morgan, Merrill Lynch and UBS, as joint lead managers, in connection with a USD475 million high-yield bond transaction by a Mauritian special purpose vehicle, Neerg Energy Limited (Neerg Energy), the proceeds of which were used to subscribe to “masala bonds” (Indian rupee denominated bonds typically settled in US dollars) issued by certain subsidiaries of ReNew Power Ventures Private Limited (ReNew), one of India’s largest renewable energy companies. The USD bond was certificated as “green” by the Climate Bonds Initiative and verified by an independent assurance statement.
The transaction enabled ReNew to raise financing from the USD bond market through the placement of masala bonds with Neerg Energy, which raised the funds to subscribe for such masala bonds by issuing USD bonds in the Rule 144A/Reg S market. The transaction provided ReNew with access to a significantly broader base of potential investors than would have been the case had it approached the same pool of investors for masala bonds.
Allen & Overy, along with local Indian counsel, helped structure the transaction which allowed certain ReNew group companies to issue masala bonds in compliance with the Indian regulatory regime while the ultimate investors purchased USD debt issued by Neerg Energy. As a result of these structural innovations:
- the masala bond issuers were not exposed to any foreign exchange risk; and
- the ultimate investors received significant downside protection from such risk and, at the same time, received a substantial pass-through of the underlying credit of certain ReNew group companies.
Commenting on the transaction, Allen & Overy lead partner Amit Singh said: “We worked closely with Indian counsel to ensure that no foreign exchange risk was assumed by the Indian issuers of masala bonds, in line with the regulations. The Neerg Energy SPV allowed us to structure an offshore transaction that was fully compliant with applicable laws, but still gave investors the USD exposure that they wanted by issuing USD bonds which had masala bonds as the underlying security.”
The Allen & Overy team was led by partners Amit Singh and Ross Stewart in Hong Kong with support from counsel Jonathan Chapman, senior associate Michele Discepola and associates Wen Gao, Julie Song, Grace Yumul and Julia Cheung. The transaction involved lawyers from our Hong Kong, Singapore, London, New York and Washington D.C. offices and included structuring advice, advice on broader regulatory matters (including US risk retention rules, AIFMD considerations and the Volcker rule) and US tax advice.
