Industrial Bank, Hong Kong branch hired a syndicate of 46, an Asian record, to lead a US$650m three-year green bond sale on Wednesday.
That beat the previous record of 42 that the same bank set in June 2021. The new deal is the sixteenth Asian offshore bond offering since 2000 to use 30 or more bookrunners, according to Refinitiv data – and all were from issuers in Greater China.
Deals with upwards of 30 bookrunners have become more common in the last couple of years. In April alone, Chinese Great Wall Asset Management used a 33-bank syndicate for its US$500m three-year trade, and Nanyang Commercial Bank had 35 banks run its US$650m Additional Tier 1 sale.
"It's quite typical for Chinese bank senior deals these days," said a Hong Kong-based banker. The deep bench of syndicate banks provides "friends and family" support for the bond sale, she said.
In Industrial Bank's case, the order book reached US$3.4bn at final price guidance, including US$2.132bn from the leads. Final deal statistics were not released.
One DCM banker called the extensive bookrunner list "silly". "Basically that's the order book," he said, adding that the banks would probably not make any money from these trades.
Logistically, having that many banks on a deal can also create problems. "By the time you have DCM syndicate, origination and a relationship manager for each bank, you could have 150 people on the call. I don't know if Zoom or Teams can handle that. They all have to say they agree to the pricing, even if they are just a joint bookrunner," said a third banker.
New bookbuilding rules
But the days of record-setting syndicates may be ending. In August, Hong Kong's Securities and Futures Commission will implement new bookbuilding rules. Under those, bond issuers will need to appoint overall coordinators to lead their transactions, and bookrunners will have less responsibility.
Arrangers will also need to be formally appointed before the deal is marketed. This move should prevent banks that were not mandated originally from bringing in orders at the last minute in exchange for being added to a syndicate. It is not unusual for Chinese borrowers to add, drop, promote or demote bookrunners during bookbuilding – although this did not happen with Industrial Bank's 46-strong syndicate.
The SFC rules will not set a limit on the number of bookrunners a borrower can hire, but it will make having a giant syndicate more burdensome, said a source. "The code does not govern issuers. It only regulates intermediaries."
The DCM banker said much remains to be seen in August. Whether or not a bank hires 20 or more banks for a trade may depend on how willing banks are to participate in such a deal, and if an overall coordinator is willing to take on the role of leading the pack and bear responsibility for a trade. There may need to be a higher fee or incentive for the overall coordinator, he said.
Industrial Bank's Reg S trade was led by global coordinators Industrial Bank Hong Kong branch, Agricultural Bank of China Hong Kong branch, Bank of China, Bank of Communications, BNP Paribas, China Minsheng Bank Hong Kong branch, Citigroup and Credit Agricole. They were also the lead managers and bookrunners with ABC International, Agricultural Bank of China Macao branch, Agricultural Bank of China Singapore branch, Bank of China (Hong Kong), BoCom International, BOSC International, CCB International, CEB International, China Citic Bank International, China Construction Bank (Asia), CCB Singapore, China Construction Bank (Europe), China Everbright Bank Hong Kong branch, China Galaxy International, China Industrial Securities International, China International Capital Corporation, China Securities International, China Zheshang Bank (Hong Kong branch), Chiyu Banking Corporation, CLSA, CMB International, CMB Wing Lung Bank, CMBC Capital, CNCB Capital, Emirates NBD Capital, Guotai Junan International, Haitong International, Huafu International, Huatai International, ICBC (Asia), ICBC London branch, ICBC Singapore, Natixis, Shanghai Pudong Development Bank Hong Kong branch, Shenwan Hongyuan (HK), SPDBI, Standard Chartered and Bank of East Asia.
The 3.25% senior notes were priced at 99.816 to yield 3.315%, at a spread of 52bp over Treasuries. The transaction was initially marketed at the 95bp area.
The Reg S bonds will be rated Baa2 by Moody's, in line with the issuer's Baa2/BBB (Moody's/Fitch) rating.