China Bond House

IFR Asia Awards 2012
4 min read
Nethelie Wong

In a year marked by domestic reforms and record offshore volumes, one bank emerged as the underwriter of choice for Chinese clients, with an enviable record in new products and international fundraisings. For capturing opportunities both at home and overseas, ICBC is IFR Asia’s China Bond House of the Year.

ICBC was at the forefront of the development of China’s bond markets during the year under review, pioneering new products and setting benchmarks that added depth and breadth to both the onshore and offshore markets.

In the fast-developing onshore renminbi market, ICBC was again the leading underwriter, having maintained a market share of around 10% over the last five years. It managed over 150 domestic bonds and worked with 100 corporate issuers to raise a total of Rmb300bn (US$44.1bn) during the review period.

Tellingly, ICBC has repeatedly been the underwriter of choice for Chinese authorities looking to bring innovative products to market. That vote of confidence underlines the bank’s experience, relationships with regulators and its ability to read the market accurately.

ICBC was a joint lead on Industrial Bank’s Rmb30bn five-year 4.2% special finance bonds, priced on December 28. It was the first off a Rmb200bn issuance plan the government specially designated to provide loans to SMEs to ease their financial pressures during monetary tightening.

ICBC led three of the first five municipal bonds sold directly by local authorities – in Guangdong, Shenzhen and Zhejiang – making it the top underwriter for a new asset class with enormous potential.

It also arranged the first finance bond from a financial leasing company, with a Rmb1bn dual-tranche transaction for Huarong Financial Leasing in May.

ICBC has also emerged as a player in the international bond markets, where it built market share faster than any of its Chinese peers during the review period.

ICBC Asia and ICBC International, the overseas investment banking arms, allow clients to access a wide range of investment-grade and high-yield markets in G3 currencies or in the offshore renminbi market.

ICBC began bringing Chinese clients overseas in 2010, and that strategy paid off as ICBC led eight US-dollar and 20 renminbi deals in the review period.

One notable achievement was a US$1.15bn offering in April for oil and gas giant CNPC. ICBC, as joint global co-ordinator, helped design an innovative structure combining a keep-well structure with an onshore guarantee that ensured the bonds rated only one notch lower than the PRC parent.

ICBC’s anchor order of US$250m was the largest real-money order from a Chinese investor, helping drive momentum for the transaction and underlining its ability to stand behind its clients.

Eventually, the deal received US$12.3bn of orders and became one of the most heavily oversubscribed issues from China’s public sector in 2012.

The high-yield market provided another illustration of ICBC’s ability to add value beyond China’s borders. Fantasia’s US$250m bond in September was remarkable for reopening the high-yield market for PRC property companies after a long summer lull. With deep knowledge of the credit and an effective marketing strategy, ICBC and its joint bookrunners managed to pull together an order book of over US$1.5bn from 118 accounts across the region.

Pricing at a yield of 13.9%, inside initial guidance of mid-14%, the deal not only came inside Fantasia’s existing yield curve, but also threw open the doors for other Single and Double B rated issuers to follow. As many as 10 PRC property firms tapped the G3 market in period between September and November.

The fast-growing offshore renminbi bond market was another feather in ICBC’s cap. The bank showed its muscle as a joint bookrunner in many landmark Dim Sum bonds. The Ministry of Finance’s latest sovereign issue, the first Dim Sum bond from a domestic corporate issuer for Baosteel, and the first 15-year tenor for Export-Import Bank of China were among the highlights.

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