HSBC China has issued the first renminbi bond in Hong Kong by a foreign bank through its China subsidiary.
The transaction is worth Rmb1 billion (US$140 million). HSBC, CITIC Securities Corporate Finance, advised by Clifford Chance, acted as the joint lead managers. Linklaters acted for the issuer.
Connie Heng, a partner at Clifford Chance led the team in Hong Kong, while William Liu was the partner in charge of Linklaters' team.
The deal comprised an institutional tranche, with the People's Bank of China approving the issuance. Heng said the process was a smooth one, but a larger test for the issuances will come from Hong Kong regulators. Following the Lehman minibond incident and subsequent retail investor backlash the Securities and Futures Exchange (SFC) has increased its scrutiny on issuances.
"The Hong Kong regulators are now extremely focused on retail investor education and disclosure," said Heng
The Bank of East Asia is facing a tougher challenge in its offering. The bank has been given permission by China's State Council to issue renminbi bonds. But because they contain a retail tranche, whereas HSBC's bond was only aimed at institutional investors, it is still in the offer period despite being launched a few weeks ago.
Subscription has not closed yet as they had to extend the deadline due to the extra time the front line sale staff need to spend with each potential retail investor who wished to subscribe.
Despite this, Heng believes that the trend of renminbi issuances will gather momentum. The PRC government began by allowing state-owned banks to issue such bonds in 2007, before moving onto foreign banks in 2009. "We hope that the PRC government will gradually open this avenue of fund raising to corporates," said Heng.
The floating rate notes, due 2011, were issued to institutional investors on a Regulation S basis. The interest rate of the notes is 0.38% over the three-month Shanghai Interbank Offered Rate.