first four-tranche formosa

CCB Asia issues largest Formosa bond

The first four-tranche note in the market raises $539m and underlines the increasing demand for renminbi products from Taiwan.

China Construction Bank Asia raised Rmb3.3 billion ($539 million) on Tuesday from Taiwan’s largest renminbi bond, underlining the increasing demand for such products from the second largest offshore renminbi market by deposits.

The Formosa bond from CCB Asia, a Hong Kong-based wholly owned subsidiary of China’s second largest lender CCB, comprises Rmb700 million  two-year, Rmb1 billion five-year, Rmb1 billion seven-year and Rmb600 million 10-year notes.

The coupon of each individual tranche were, respectively, 3.3% compared to guidance of 3.35%, 3.75% versus 3.8%, 3.95% versus 4% and 4.08% versus 4.13%. The issuance is the first four-tranche renminbi bond in Taiwan. 

The Hong Kong branch and the Taipei branch of CCB have tapped the Formosa bond market before. They each raised Rmb2 billion with tenors in three-, five- and/or seven-years.

CCB Asia’s issuance this time is the first one from a Chinese bank with a 10-year tenor in the Formosa bond market. 10-year is rare to be seen and only Korea Export-Import Bank issued Rmb500 million note in such tenor in January at a yield of 4.5%.

“The issuer wants to extend its bond maturity curve in Taiwan and choose a four-tranche structure,” said a banker on the transaction.

The deal further underlines Taiwan’s strength in attracting investors to the renminbi bond market.

Taiwan had accumulated Rmb295 billion at the end of August, according to data released by the island's monetary authority, a 30-fold increase from February 2013 when it started its renminbi deposit business.

The market can also provide longer-term tenors for renminbi bonds, due to its large insurance industry with strong needs in stable returns and longer-term investments.

“Taiwan has sufficient renminbi deposits but investors there don’t have enough choices in investment. We expect more supply from the Formosa bond market,” said a person close to the company.

Taiwan's regulators are keen on opening up the bond market more for overseas borrowers to allow them to issue bonds in multiple currencies including offshore renminbi.

In July, Taiwan’s legislature passed rules allowing Taiwanese insurers to exclude foreign-currency bonds issued in the local market from their overseas investment quota, boosting insurers’ demand for such bonds, including Formosa bonds.

Furthermore, Taiwan’s Financial Supervisory Commission raised the quota on Chinese banks’ Formosa bond issuance this year to a range of Rmb20 billion to Rmb25 billion from Rmb10 billion to Rmb15 billion. It may raise the quota further by year-end, to a range of Rmb30 billion to Rmb35 billion, according to Taiwan media.

As of November 11 this year, 20 companies have raised a total Rmb13.5 billion through Formosa bonds.

¬ Haymarket Media Limited. All rights reserved.
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