The offshore renminbi bond market might be slightly costlier than its US dollar counterpart in the past few months, but there are companies that still see the benefits of issuing the former.
Bosch und Siemens Hausgeraete is a corporate that is keen to re-enter the offshore renminbi market, especially given that some of the tranches of its two dim sum bonds – which took place in 2011 and 2012 – are up for refinancing as early as 2014.
“We have six tranches in total up to tenors of 10 years that requires refinancing. That will be one of the reasons that will re-attract us to the [CNH bond] market again,” said Andreas Stolzenburg, head of corporate finance for Bosch and Siemens at Euromoney Conferences’ Global Offshore Funding Forum held in Hong Kong on May 8.
Bosch und Siemens Hausgeraete issued a Rmb2 billion (US$313.3 million) in September 2011 split into three, five and seven year. This was followed in 2012 by a Rmb1.25bn divided between 2.5-year, five-year and 10-year maturities.
The unattractive loan tenors for renminbi funding available in the onshore market has been encouraging Bosch & Siemens to look at other alternatives and Hong Kong’s CNH bond market has always been a favourite, despite high pricing.
“The problem was that our operations grew so widely over the years that we had substantial funding requirements onshore,” said Stolzenburg. “We found that the tenors available in China’s loan market are not as favourable as a possible dim sum bond is perceived.”
While the German company’s feedback towards its previous bond issuance is positive, there are other corporate treasurers in the panel who are more reluctant to issue dim sum bonds.
Hong Kong and China gas, better known as Towngas, was one of the pioneers of the CNH bond market, issuing a Rmb1 billion five-year note back in 2011 at an ultra low coupon of 1.4% However, pricing dynamics are not as attractive in 2013 and the utility company it looking at cheaper alternatives like the US dollar.
“The cost of CNH is not very attractive anymore. The tenors are still very limited, at most you can get a seven-year bond if you’re lucky, but there’s no problem doing a five year,” said John Ho, chief financial officer for Towngas in the panel. “When I’m raising funding I’ll look at alternatives and the US dollar right now is far more appealing.”
Other sources of funding
Of course, dim sum is not the only source of renminbi funds. CLP Holdings, the Hong Kong-based energy provider, does not see the need to issue a CNH bond, only because it has substantial renminbi-denominated cash reserves that it can plough back into the onshore market to fund its projects.
“[The reason] why we haven’t done it yet is because from a funding currency match perspective, we have started to get dividend repatriation from China into Hong Kong in renminbi since the liberalisation of the currency,” said Francis Ho, director for group treasury at CLP in the panel. “That means we have a pool of funding, already in Hong Kong, to help fund our equity injections to our new projects in China.”
“Unless we have more investments that carry a bigger value of equity investment in China, we are alright with using company cash flows for our investments,” he added.
But while the company is also open to a bond issuance to fund larger projects, the cost of swapping from renminbi to Hong Kong dollars is, unfortunately, not very attractive.
“We can do the swap from renminbi to Hong Kong dollars. Bankers have spotted opportunities in doing that and they can identify investors,” said Ho. “But the problem is that after taking into consideration the cost of swaps, the renminbi has not yet reach the stage of cost effectiveness for general corporate funding.”