Baring Asia in talks to raise $600 million offshore debt to finance Hinduja Global buy

Baring Private Equity (Asia) is in talks with a group of lenders to raise as much as $600 million (about Rs 4,450 crore) through an offshore loan to part fund its acquisition of healthcare business outsourcing operations of , the IT services arm of the Hinduja Group.

The debt facility, said to be a leveraged buyout financing instrument, where a part of the business being acquired too is often used as security, may be a five-year maturity loan, people with direct knowledge of the matter told ET.

“They are in talks with at least a dozen bankers. First round of proposals were submitted last Friday,” said one of the people.

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Some of the banks Baring Asia is talking to include Barclays, BNP, ING, Investec, Standard Chartered, HSBC, Citi, Deutsche and Sumitomo Mitsui Banking Corp, the people said.

Another round of negotiations would begin this week before final terms are finalised, they said.

The loan is expected to be priced after adding 475-500 basis points over the London Interbank Offered Rate (LIBOR), a global gauge.

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Baring Asia did not respond to an email seeking comment until press time Sunday. The banks could not be contacted immediately.

Last week, Baring Asia signed a definitive agreement to acquire the healthcare services vertical of Hinduja Global Solutions at an enterprise value of Rs 9,000 crore.

If successful, this would be the second large leveraged debt facility being arranged within a span of one month to fund an acquisition in India, after the fundraising for the Mphasis deal.

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“The proceeds will be transferred to a holding company before paying for the acquisition,” said another executive. The fundraising is anticipated to have a threshold limit, which should not be five times higher than the operating profit of the acquiring company.

The contract for fundraising is expected to incorporate a clause for replacing the benchmark gauge, as the LIBOR is nearing the end of its shelf life. It will be replaced starting next year.

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. Last month, Blackstone and its co-investors including Abu Dhabi Investment Authority, GIC and University of California Investments raised $1.1 billion to finance their $2 billion acquisition of Mphasis.

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Amid underlying uncertainties, deal activity in India saw a healthy 3% increase in volumes at 1,301 deals in 2020, with 29% growth in value at over $77.7 billion compared with 2019, according to data compiled by Grant Thornton.

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