Hero FinCorp 1st Indian company to bag SOFR-Syndicated loan

The company promoted by Hero MotoCorp levered up $350 million at 168 points above SOFR.

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Hero FinCorp which was incepted in December 1991 as another vertical of Hero Honda, lending money to its dealers. It has now grown into a trusted non-bank financial entity. Its loan book has been evaluated at ₹ 20,000 crore, which has equal distribution in corporate loans and retail segments.

“Hero FinCorp enjoys the position of being the 1st Indian company to have bagged a secure overnight financing rate (SOFR) attached to a syndicated loan,” said confidential sources to ET.

The company promoted by Hero MotoCorp levered up $350 million at 168 points above SOFR; this is a new international standard that has replaced LIBOR or London Interbank Offered Rate from the start of this year.

RBI sent a directive to all the banks via a circular dated July 8th, 2021 to terminate writing contracts in LIBOR starting December 31st, 2021; this decision came in accordance with the global benchmark rate.

What is a syndicated loan?

A syndicated loan differs from a regular loan because it is staked by a couple of banks and then peddled to other banks which again bid for the parts of the entire loan.

The Indian company Hero FinCorp was promoted to about 200 international banks. Now loans like this are of the opinion to provide absolute validation of a borrower’s history and accreditation in the global financial system.

Although many Indian companies have applied for overseas SOFR loans from the start of this year, Hero FinCorp was the winner to have bagged a syndicated loan pinned to the current rate.

Financial Conduct Authority of the UK announced on March 5th, 2021 that LIBOR no longer holds the representative rates from December 31st, 2021. Hero FinCorp had a 19% capital adequacy ratio surpassing the prescribed regulatory mark, for the fiscal year ending March 2021.