ICBC (Asia)’s Rmb1.5 billion (US$235.3 million) 6% tier-two subordinated bonds due 2021
Global coordinators: Bank of China (Hong Kong), HSBC, ICBC International
Bookrunners: Credit Suisse, DBS, Goldman Sachs
For all that China boasted record levels of M&A activity and bond issuance, the number of standout transactions from the country was surprisingly low.
While many respectable deals were done, relatively few were genuine groundbreakers. One of the few exceptions was ICBC (Asia)’s Rmb1.5 billion 10-year non-call five subordinated bond issue.
This was a deal that could easily have sat in the Hong Kong awards space, but we felt that China’s promotion of offshore renminbi (CNH) through various offshore deals deserved recognition, and within that market this was a true benchmark, in the so-called dim sum market and in the broader bond market in Asia.
The state-owned bank’s bond issue marks the first Basel III regulatory capital issue to originate in Asia and the first issue of subordinated debt in to be issued in offshore renminbi (CNH).
The deal from the subsidiary of China’s largest state-owned bank was one of the first transactions to count towards tier one and tier two capital following the Basel Committee’s announcement of its capital adequacy requirements for banks. In this capacity ICBC’s deal gained approval from the Hong Kong Monetary Authority (HKMA), which effectively confirmed the de facto central bank’s views on capital adequacy.
The deal’s Basel III requirements include a provision that compels investors to absorb losses. ICBC (Asia)’s preference is that this means a writing-off the principal amount of the debt in the case that it were to become non-viable. Despite this covenant ICBC (Asia) was able to drum up strong support for a deal that should now become a benchmark for Asian Basel III-compliant deals.
Other transactions that were noteworthy included the Ministry of Finance’s Rmb20 billion five-tranche bond auction in August, which helped set an array of benchmarks for the dim sum bond market, and Baosteel’s Rmb3.6 billion three-tranche deal in November was the first straight corporate bond issue in CNH, instead of a deal issued by a financial entity.
But for innovation and market development with feel ICBC’s deal wins out.