The state-owned Power Finance Corp. is expected to use the debt capital markets the following week to raise up to 6,000 crore through securities with two separate sets of maturities. On May 8, the power financier is anticipated to offer five-year non-convertible debentures worth 600 crores with a greenshoe option of 3,000 crores. The company is also expected to issue 400 crore in three-year bonds on the same day, with a further 2,000 crore in subscription options.

PFC has chosen a very uncommon option for the tranche of three-year bonds: a floating rate. According to reports, the bonds will be offered at a premium over the yields on the government's three-month Treasury Bills, with the coupon reset every three months. The 91-day Treasury Bill cutoff was set at 6.90% at the most recent primary auction.

The five-year bonds will contain a put-call option after two years. "Choosing a floating rate bond (FRB) was an uncommon choice; as a result of the volatility in Treasury Bills last year, the government no longer issues FRBs. It's possible that the two-year put-call option for the five-year bonds was developed with mutual funds in mind.

Rating agencies Crisil, CARE, and ICRA have assigned the bonds a AAA rating. On May 8, the auction for the three-year debt is slated to run from 11:00 am to 12:00 pm, while the auction for the five-year bonds is anticipated to run from 10:30 am to 11:00 am.

Since early April, government bond yields have sharply decreased, making corporate debt capital market fundraising less expensive. The benchmarks used to determine the pricing of corporate debt are the yields on government bonds.