ONGC gas prices
An engineer of Oil and Natural Gas Corp (ONGC) works inside the Kalol oil field in the western Indian state of Gujarat Sep. 12, 2009.Reuters file

ONGC Videsh Ltd (OVL) seeks to raise $500 million to $1.1 billion through issuance of dollar bonds to finance its equity purchase of Russian Vankor oilfield.

A fully owned subsidiary of Oil and Natural Gas Corporation (ONGC), OVL acquired 15 percent of the oilfield for $1.26 billion and will reportedly use the proceeds from the bond to refinance bridge loans taken during the acquisition.

Global rating agencies Moody's and S&P assigned long term issue rating of Baa2 and BBB-, indicating OVL's relatively low risk investment and capacity to meet debt obligation, respectively.

Press Trust of India highlighted that both rating agencies were optimistic about OVL's credentials. They said that the Indian state-owned ONGC, one of Asia's largest oil exploration and production company, was robustly placed with consistent production, profitability and strong reserve positions. It added that the oil major "unconditionally and irrevocably guarantee the notes."

ONGC has restricted its guarantee amount to 109 percent of the principal amount of the bonds outstanding, said Vikas Halan, Moody's Vice President and Senior Credit Officer to PTI. He added that the guarantee was adequate to secure the amounts due to bond holders.

The news agency noted that ONGC was sitting on a pile of cash and cash equivalents of Rs. 25,800 crore with debt amounting to one third of it with one year maturity. It added the company's balance sheet reflects other liquidity sources.

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