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ADB set to release Pandas from captivity, plans rupiah deal

The resurgence of the Panda bond market is set to get another boost by the return of one of the issuers that kick-started the market in 2005 — the Asian Development Bank. The supranational also has plans to launch debut deals in a variety of other Asian currencies

The Asian Development Bank yesterday revealed plans to re-enter the onshore renminbi bond market, returning to an asset class that is regaining strength after years of inactivity and that it helped to launch.

“We’re in discussions with regulators to re-access the Panda market,” Pierre Van Peteghem, Asian Development Bank treasurer, told GlobalMarkets. “The last time we issued a Panda bond was in 2009, a 10 year deal.”

Supranationals like the ADB use issuances in local currencies to finance their operations in those countries, such as development of infrastructure.

The ADB and the International Finance Corporation sold the first ever Panda bonds — renminbi bonds issued by foreign entities in the onshore Chinese market — in October 2005. Issuance dried up a few years later, but began afresh in September 2015 with deals from the likes of Bank of China Hong Kong and HSBC.

Further in the future, the ADB may also follow the lead of the World Bank to raise renminbi funds by selling a bond denominated in special drawing rights (SDR) in the onshore Chinese market.

“We might consider an SDR bond like the World Bank’s, where proceeds were in renminbi and there was an option for investors to transfer their SDR investment to renminbi,” said Van Peteghem. “But no discussions have taken place on this yet. We’d be interested if it gives us another cost efficient source of renminbi.”

While no other issuers have followed up the World Bank’s SDR deal in late August, the supranational’s treasurer Arunma Oteh told GlobalMarkets earlier in the week that other issuers had enquired about the process of selling such a bond.

IN THE PIPE

The ADB has more concrete plans to issue bonds in other local currencies, adding to its work this year in building a maturity curve in Masala bonds — offshore bonds denominated in Indian rupees — as well as printing in other currencies such as Georgian lari and Thai baht, which it has also been active in this year.

“We are looking at other currencies to finance local operations, not only with onshore or offshore issues but using cross currency swaps,” said Van Peteghem. “We are working on a deal in Indonesian rupiah. This is a country where we have a pipeline of operations that we need to refinance. We’re also looking at deals in the currencies of Armenia, Azerbaijan and Sri Lanka.”

Aside from local currency development, much of the ADB’s focus will be in the green bond market. This year, it became the first public sector issuer to sell a dual tranche green bond, and it sees the asset class playing a big part in its future.

“We have a large pipeline of operations in renewable energy and other environmental projects,” said Van Peteghem. “By 2020, $6bn of our operations will be in the renewable energy sector, doubling what we have now. The green bond market is getting to full maturity and we will be a regular issuer in it.”

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