The Asian Development Bank (ADB) announced that it will issue its second renminbi-denominated "Panda" bonds in the domestic capital market of the People's Republic of China (PRC). The issue will have a principal amount of CNY 1 billion, a bullet maturity of 10 years, and a fixed coupon rate payable annually.
ADB and lead manager China International Capital Corporation Limited (CICC) have conducted road shows in Shanghai and Beijing. Book building will be done on 4 December 2009 and pricing will take place no later than close of business on the same day. The Panda bonds will be issued in the national interbank market with clearing and settlement through the China Government Securities Depository Trust & Clearing Co., Ltd.
ADB will use the proceeds of the Panda bonds in the PRC to fund private sector clean energy and energy efficiency projects. The objective is to help reduce the currency risk and provide long-term RMB financing for private enterprises.
“ADB is pleased to return to the PRC bond market after ADB’s inaugural Panda bond issuance in 2005," said Bindu Lohani, ADB's Vice-President of Finance and Administration. "ADB is privileged to continue to contribute to the further development of the bond and derivatives markets in China.”
As with the first bond issue in the PRC, ADB will execute interest rate swap transactions in relation to the issuance of Panda bonds.
“Additionally, ADB will be able to provide long-term local currency financing to private sector and non-sovereign borrowers in the PRC through this bond issuance,” said Mr. Lohani.
CICC’s Managing Director and Head of Investment Banking, Dr. Wei Ding, said “CICC is honored to be the sole lead underwriter for ADB's second Panda Bond offering. The anticipated success of the transaction demonstrates the maturing of China's bond markets, and will lead the way for more RMB bond offerings from international issuers.”
The Panda bonds will provide investors with an excellent opportunity to diversify and strengthen their portfolios with the highest credit-quality securities and longer-dated instruments.
“The 10-year tenor of the Panda bonds will match the need of institutional investors for longer-dated, high-quality assets. Also, the bonds will contribute to the development of yield curve and establishment of pricing benchmarks for use by local issuers,” said Mikio Kashiwagi, ADB's Treasurer.
The launch of the Panda bonds is another landmark in ADB’s mission to contribute to the development of regional bond markets. Since 2004, ADB has completed five other market-opening transactions in the region’s local currency bond markets. In addition to local currency bond issuances, ADB also undertakes cross-currency swaps to meet the local currency funding requirements of its development projects. ADB aims to pursue its local currency bond issuances with other Asian government authorities particularly to those developing member countries where bond proceeds can either be swapped into one of ADB’s operating currencies or be retained to finance ADB projects that require local currency financing.