Bank of China raised over $1.8 billion on November 13 through a four currency, five tranche deal to support the development of the Greater Bay Area (GBA) in southern China.
Touted by President Xi Jinping as a rival to Silicon Valley in the US, the GBA is the Chinese government's scheme to link the cities of Hong Kong and Macau with nine neighbouring Chinese cities into an integrated economic and business hub.
Home to 68 million people, the area had a GDP of $1.3 trillion in 2016 according to data from a KPMG report in September last year, only just behind the Greater Tokyo Bay area and New York.
And the Bank of China has jumped on the opportunities the GBA promises, with its first GBA bond offering in renminbi, US dollars, Hong Kong dollars and Macau pacatas with three maturities; two, three and five years.
The bond has been issued through its Hong Kong and Macau branches, the seventh time that the bank’s offshore entities have used its $40 billion Hong Kong medium-term note programme to print paper from multiple locations. The bonds are listed on Hong Kong’s Stock Exchange.
They have been rated A by Fitch and A1 by Moody’s.
Through BOC Macau
Two US-dollar tranches
Expectations of a hike in interest rates in the US led both the three-year and five-year tranches to take advantage of a floating rate, and both tightened in 25bp from initial guidance. The three-year priced at 75bp over US dollar Libor, while the five-year priced at 85bp over US dollar Libor.
Commenting on the recent increase in the issuance of floating rate bonds, Katie Chen, director of financial institutions at Fitch Ratings said: “Notes with floating rates would be more welcomed by investors in a rising interest rate cycle.”
Macao pacata tranche
This is the first time that the Bank of China has publicly offered a Macao pacata tranche, according to the Bank of China press release. The two-year $375 million equivalent deal priced at par with a 3% coupon. Again it tightened in 30bp from initial guidance.
Through BOC Hong Kong
Renminbi tranche
The smallest of the five tranches, the three-year $145 million equivalent dim sum paper priced at par on a coupon of 4.45%. Despite some initial reservations from investors, it tightened in from initial guidance of 4.75%.
“There was a little doubt that the recent PBOC Rmb10 billion ($1.44 billion) offshore issue may affect liquidity, but the paper was very well received by the market,” said Christophe Cretot, head of debt origination and advisory Asia Pacific, at Credit Agricole CIB.
Hong Kong Dollar tranche
Second in size to the US dollar tranche, the two-year $510 million equivalent Hong Kong dollar tranche priced at par on a coupon of 3.3% - 30bps tighter than initial guidance
Proceeds
According to a statement from the Bank of China, proceeds will be used to finance and refinance infrastructure projects in the area, public transport and public spaces, private sector investment projects, and corporate cross-border finance projects.
Notably, part of the proceeds will be used to refinance the recently opened Hong Kong-Zhuhai-Macau Bridge (HZMB), the $20 billion road bridge and tunnel that connects Hong Kong with Macau and China, according to Nicholas Zhu, vice president and senior analyst for Moody’s Investors Service.
Bank of China was the sole lead bank and agent bank of the syndicated loan to HZMB.
Syndicate
Joint global coordinators, joint bookrunners and joint lead managers for the renminbi tranche were Bank of China, Citigroup, Crédit Agricole CIB, CTBC Bank Hong Kong branch, Standard Chartered Bank and SEB.
Joint global coordinators, joint bookrunners and joint lead managers for the Hong Kong dollar tranche were Bank of China, BNP PARIBAS, HSBC, JP Morgan and UBS.
Joint global coordinators, joint bookrunners and joint lead managers for the Macau pacata tranche were Bank of China, Banco Tai Fung, Luso International Banking, Macau Chinese Bank and BNU.
Joint global coordinators for US dollar tranche were Bank of China, DBS, MUFG and Wells Fargo Securities. They were joined as bookrunners and lead managers by Bank of Communications, China Everbright Bank Hong Kong Branch, Commonwealth Bank of Australia, ICBC International, ICBC (Asia), KGI Asia, Mizuho Securities and Scotiabank.
