Chinese CBs go short as approvals slow
Some Chinese issuers have opted for short-dated convertible bonds to take advantage of a loophole as the body that regulates offshore debt issuance has been slow in granting approvals.
So far this year, three out of the four CBs from Chinese issuers had a tenor of 363 days. CMOC Group, the world’s leading producer of copper and cobalt, on Monday raised US$1.2bn from an upsized 363-day CB, following AI drug researcher XtalPi Holdings’ HK$2.87bn (US$368m) deal on January 7 and Chinese brokerage GF Securities’ HK$2.15bn 363-day CB on January 6 (part of an equity combo).
Bankers are expecting other Chinese issuers to sell short-dated CBs as it is becoming more difficult to obtain approval for their debt issuance quotas from the National Development and Reform Commission, China’s top economic planning agency. Only bonds with a tenor of one year or above need NDRC approval.
“Since around mid-last year, the NDRC has been much stricter in granting approval. We don’t know what caused the change of pace, but what we are seeing is they ask a lot of questions for almost every application,” said a banker.
“NDRC used to hand out approval in around six to eight weeks but now it can take months,” he said.
“It is still okay if the bonds will be used for refinancing, but it takes almost half a year to obtain the NDRC quota if the company wants to increase debt,” said another banker.
Some issuers that had been waiting for quotas have decided to go for a 363-day deal instead as they wanted to take advantage of a strong share price while the market was hot.
CMOC is one of them. According to people familiar with the situation, the company has been waiting for quota approval but opted for a short-dated deal after its share price surged 42% in the past three months.
GF Securities also chose a 363-day deal to avoid the lengthy approval process, said people with knowledge of the matter.
Additional layer
The NDRC in May 2025 published a list of frequently asked questions regarding the existing registration and approval process for Chinese companies applying to issue offshore debt.
The regulator said it would give priority to support issuance by high quality companies, such as those with high credit ratings, a solid core business and sustainable financial performance, and which plan to use the proceeds to support the real economy.
The FAQs clarified the existing rules governing foreign debt issuance, giving more examples on which types of companies need to seek approval and what documents issuers need to submit.
The NDRC also mentioned some applications will need approval at provincial level first before they are passed on to Beijing.
“For refinancing deals, they only need approval from the Beijing level. For increasing debt and if the issuer is considered low quality, it needs approval from the provincial level,” said the second banker.
This extra layer of approval is believed to be one of the reasons for the slow process, according to bankers.
Apart from faster execution, 363-day CBs also work better for companies which do not have much stock borrow available.
“Investors normally won’t hedge for deals under one year, so a 363-day CB is a good option for those issuers,” said a third banker.
Strong response
CMOC’s CB drew strong demand as it provided investors with a rare chance to take exposure to a copper company.
The zero-coupon CB was launched at a base size of US$1bn and marketed at a zero yield to maturity and a conversion premium of 28%–32% over the reference H-share price, which was the clearing price of a concurrent delta placement.
The conversion price was set at HK$28.03, a 32% premium over the delta placement price of HK$21.24. The placement price represents a 2.5% discount to Monday’s close of HK$21.78.
The deal was well covered with more than 150 investors participating, including equity long-only funds, credit long-only funds and hedge funds. The majority of the deal went to outright investors and the top 20 accounts took around 70% of the deal.
The size of the delta placement was less than 10% of the deal size.
Proceeds will be used for expansion and sustaining capital for the company’s overseas mining and processing assets, enhancing working capital flexibility and general corporate purposes.
Bank of America was sole global coordinator and lead-left bookrunner. Citic Securities was joint bookrunner.