Asia-Pacific Structured Finance Issue: Nio Financial’s Rmb1.3bn green auto lease ABN

IFR Awards 2022
2 min read
Morgan Davis

Green light
The dynamics of 2022’s capital markets created numerous challenges for bond issuers, but China’s domestic borrowers were able to lean into the renminbi market, which still provided attractive pricing options and receptive buyers.

Nio Leasing, a subsidiary of electric vehicle manufacturer Nio, took its renminbi asset-backed notes and packaged them in a way that would bring in international investors, increasing its appeal and making it the best structured finance issue of the year.

Nio Leasing’s privately placed deal, sold in June, was made up of Rmb1.025bn (US$152.5m) 2.66% Class A notes, with 21.15% credit enhancement and rated AAA by Lianhe, and Rmb275m subordinated notes. The bonds, which were priced at par, are expected to mature in July 2024 and March 2027, respectively.

As a domestic borrower, Nio Leasing could have sold the green deal successfully in the China interbank bond market without needing to appeal to international investors. But it decided to push itself further, making the transaction eligible through Hong Kong’s Bond Connect scheme.

The borrower sold all of the Class A notes to international investors, while the subordinated bonds were fully retained by the originator. In comparison, its earlier ABN deals were sold almost entirely to local investors.

Nio Leasing’s efforts to bring its transaction in line with international standards paid off, giving it its tightest deal pricing ever.

The trade demonstrated the use case for a green label on ABN trades, but it was also emblematic of a broader trend of increased interest in cross-border renminbi trades, as Chinese issuers looked to reach international investors without taking additional currency risk.

Such international connections play a significant role in China’s ambitions to internationalise the renminbi, and are likely to be increasingly important to bond and ABN deals in future – not least because of the pricing and diversification benefits to issuers.

The successful ABN transaction in June was not the only effort Nio made to reach international investors in 2022. The issuer added secondary listings in Hong Kong and Singapore to its main listing in New York, becoming the first carmaker to be listed on three exchanges and showing its commitment to transparency.

Nio Leasing 2022-1 Green Asset Backed Securitisation Trust issued the notes, while Nio Financial Leasing Co was the originator.

HSBC was the sub underwriter, financial adviser and account bank. Bank of Communications was lead underwriter and bookrunner.

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