Greater Bay Area

ICBC’s debut GBA green bond shows regional aspirations

China's largest lender has sold the first green bond dedicated to green development in the Greater Bay Area. Similar bonds are expected in the future.

Industrial & Commercial Bank of China reaffirmed its commitment to the Guangdong-Hong Kong-Macau Greater Bay Area (GBA) by issuing, on Tuesday, the first ever green bond dedicated to the development of the new economic and business hub in southern China.

The world’s largest bank by market capitalisation has come up with a triple currency, five tranche deal to meet both the diversified funding needs for GBA companies and demands from fixed income investors. The new bond was issued through its Hong Kong branch.

Apart from a two-year Hong Kong dollar fixed rate tranche and a one-year fixed rate denominated in offshore Renminbi (CNH), the green bond also features three US dollar tranches including a three-year fixed rate, a three-year floating rate and a five-year floating rate offering.

Altogether ICBC has raised $3.15 billion from the Reg S deal, which was about 72% larger than Bank of China’s quadruple currency Greater Bay Area bond in November last year.

Each of the two USD floating rate notes was settled with a final offer size of $1 billion, while the USD three-year fixed rate note was set at $500 million. The Hong Kong dollar tranche raised HK$4 billion ($510 million), while the CNH note came smallest in size at Rmb1 billion ($140 million).

Despite having the entire deal issued through its Hong Kong branch, ICBC does not appear to have been affected by Fitch’s recent decision to downgrade the city’s sovereign rating amid the ongoing political turmoil.

Pricing for all three USD tranches tightened in by at least 25 basis points from their respective initial price guidance.

The three-year floating rate note had the most aggressive tightening of 28bp against the initial price guidance of three-month Libor plus 95bp. The five-year floating rate note tightened 27bp from 105bp over Libor, while the three-year fixed rate note tightened by 25bp against three-year US Treasuries plus 105bp.

Final pricing came in at 67bp over Libor for the three-year floating rate and 78bp over Libor for the five-year floating rate tranche. For the three-year fixed rate, final pricing was fixed at 2.25%, or 80bp over US Treasuries.

Meanwhile, pricing of the CNH tranche was set at the tight end of the 3.1% to 3.15% guidance. The Hong Kong dollar tranche was offered at a fixed coupon of 2.2%.

ICBC, Agricultural Bank of China, Bank of America Merrill Lynch, Bank of China, Bank of Communications, BNP Paribas, Commonwealth Bank of Australia, Credit Agricole, Industrial Bank, HSBC, SMBC Nikko, Standard Chartered and UBS are joint global coordinators of the bond sale. Credit Agricole is the sole green structuring advisor.

COMMITTMENT

With the latest deal, ICBC becomes the first financial institution to issue a green bond to support development of the Greater Bay Area. Bank of China was the first to issue a straight bond for GBA development in November last year.

These two lenders have been going head-to-head in the pursuit of bonds that support key national strategies. Over the last few years, the duo have sold multiple bonds dedicated to the Belt and Road initiative, China’s global development strategy involving infrastructure investments in 152 countries.

Still, ICBC had an edge when it comes to green financing. The bank issued its inaugural Belt and Road climate bond in November 2017. In April this year, it raised $2.2 billion from a green bond offering that focuses on Belt and Road inter-bank regular cooperation.

The bank has already identified a set of green projects in the Greater Bay Area that will be potentially funded by proceeds from the bond sale. The 39 projects, worth about $4.1 billion, include wind and solar power, railway transportation and urban rail transit, according to the bond’s marketing materials.

To discover the opportunities related to China’s bond markets, please join us at the China Fixed Income Summit in Hong Kong on September 26th

 

 

¬ Haymarket Media Limited. All rights reserved.