The International Finance Corp (IFC) sold a debut Panda bond deal in the Chinese domestic market on Monday (Oct 10), raising Rmb 1.13billion ($140 million) from a 10-year fixed-rate offering.
Jointly led by China International Capital Corp and Citic Securities, the deal represents the opening of the Chinese domestic market to international financial institutions. It also marks the first time a supranational has opened an Asian domestic bond market without using an international bank like Citigroup or HSBC as lead manager.
The deal, sold to institutional investors, was priced at par with a coupon of 3.4%, offering a 25bp premium to China's benchmark 10-year government bond, which was quoted at 3.15% at time of pricing. This pricing is slightly wider than most other recent supranational deal's in Asia's regional bond markets.
In May, for example, the Asian Development Bank (ADB) became the first supranational to issue in Thai Baht with a deal that priced at 17bp over the government curve. In 2004, it also opened the Indian rupee market with a deal that priced at 17bp over and launched its debut Singapore dollar-denominated deal at 24bp over.
Both the IFC and ADB were granted approval to issue in remnimbi over the weekend. The latter has also begun marketing a Rmb 1 billion 10-year that should price later this week.
The IFC chose to run the deal via market build and closed the books shortly after receiving bids amounting to the full size of the offering.
As a stipulation of the government's final approval, proceeds from the sale are not being swapped back into US dollars. The funds will be used to finance three Chinese companies. Guangdong Development Industry holdings will receive Rmb 406 million; Anhui Conch Cement Company will receive Rmb 650 million, while Chindex International's United Family Hospitals will receive Rmb 65 million.
With an estimated Rmb 6.5 trillion having been traded already this year, the Chinese domestic bond markets has a fully developed yield curve and is highly liquid. The introduction of two international financial institutions will help to further develop a market many offshore issuers are keen to access.
The bond issue also plays an important part of the IFC's broader strategy aimed at developing the domestic financial sector and local capital markets in China according to Javed Hamid, IFC's director for Far East and the Pacific.
The IFC has invested more than $2 billion in over 100 private Chinese-based companies over the past 20-years