GlobalCapital China announces 2019 awards winners: Part I

After spending the past month talking to banks and their clients, we can now reveal the first part of the results of our annual GlobalCapital China Capital Markets Awards.

The competition in most, if not all, the categories was truly fierce, reflecting the amount of focus banks – both international and domestic – have given to developing their China business. That particularly stood out this year, as the domestic market became more sophisticated, and was opened up further to foreign issuers and underwriters.

That, of course, meant picking the winners was no easy task, but GlobalCapital China is confident it is recognising the best in class in the Mainland capital makets during our awards period.

Our thanks to all those who took the time to explain their businesses to us. And congratulations to the winners.

Bank of China

For the second year running, Bank of China is GlobalCapital China’s Best FIG Issuer of the year. It’s a much deserved victory, given the state-owned bank continued to not only fulfil the Chinese government’s policy agenda through debt issuance, but also introduced different novel structures to the market, both onshore and offshore.

In the international bond market, it broke new ground in October by printing Asia’s first floating rate bond linked to the secured overnight financing rate (Sofr). One of the top candidates to replace Libor after the end of 2021, Sofr is an overnight rate published daily by the Federal Reserve Bank of New York since April 2018. BOC’s $960m green transaction featured dollar, euro and offshore renminbi tranches.

BOC’s outing was a landmark for the region, pioneering a Sofr-linked bond offering to investors. What also stands out is that the bank was eager to test the boundaries of the market with this deal, even being willing to pay up a few basis points versus a Libor referenced deal to kick-start the much-needed transition away from the old benchmark.

In China’s onshore market, BOC opened a new funding channel for the country’s banks, after it sold the first perpetual bond from a commercial bank domestically in January this year.

Through the twice subscribed tightly-priced Rmb40bn ($5.9bn) additional tier one transaction, BOC paved the way for China’s commercial banks to use the perpetual bond route. Since then, 13 more banks have issued perpetual bonds with a total value of Rmb519.6bn, Wind data shows.  

BOC, like the other three big four banks in China, is a regular originator of onshore RMBS deals. In the past three years, the firm has churned out 12 RMBS deals with a total value of Rmb113.6bn.

That’s not all. BOC’s contribution to the Belt and Road Initiative has continued since it sold its first international bond in support of China’s ambitious infrastructure project in June 2015. The issuance has now become annual, and this year, BOC raised $3.8bn from eight tranches of bonds in five currencies across five bank branches. It was the largest transaction ever sold under the BRI label. 

BMW

BMW was not the only corporate issuer to tap the Chinese onshore renminbi liquidity this year. Daimler, Trafigura and Veolia Environnement have all ventured into the Panda bond market. In the auto ABS market, manufacturer Dongfeng Nissan and US auto company Ford have been frequent issuers. But no other corporation has had the same level of breadth and diversity as the German automaker.

This year, BMW stepped up its efforts in two new asset classes — Panda bonds and asset-backed notes.

In March, the carmaker sold its first Panda bond through subsidiary BMW Finance, before printing two more Panda bonds. All three private placement deals helped BMW surpass rival Daimler, which issued two Pandas this year.

That’s not all. BMW also closed its first asset-backed note onshore. Asset-backed notes, sold by non-financial corporations in the interbank market, are an asset class that is new even to Chinese domestic issuers. But in April, BMW used its majority-owned onshore subsidiary, Herald International Financial Leasing, as the originator to raise Rmb2.5bn through an ABN.

The deal was the first auto ABN by a foreign originator, and opened a new funding channel for global automakers. Later in September, BMW also returned for its second ABN. Despite the short operating history of Herald, both ABNs were priced roughly at the same level as BMW’s ABS deals. The firm has been a regular issuer in the onshore ABS market, bagging Rmb42.5bn ($6bn) from eight deals in the past three years, Wind data shows.

By testing out new types of issuance in China’s onshore market, BMW has not only diversified its funding sources, but has also shown the potential of the country’s capital markets to other foreign corporations.

Portugal

Many SSA issuers stood out during our awards period. The People’s Republic of China, for one, sold a series of blockbuster deals. The sovereign bagged $6bn from a four-tranche mega transaction in November, its largest dollar bond. The government also raised €4bn through another deal in the same month. Both bonds were priced tightly.

However, with this award, GlobalCapital China is recognising an SSA issuer that set an example for others to follow. In this case, it was Portugal.

During our awards period, four SSA issuers printed renminbi bonds in China — Portugal, Hungary, the Republic of the Philippines and China-based supranational New Development Bank. Among the four, Portugal stood out as its Rmb2bn ($285m) Panda bond opened up Eurozone countries to China’s bond market.

It wasn’t smooth sailing. Panda bonds are infamous for their tedious issuance process, with some issuers often waiting as long as three years before getting the approval from the People’s Bank of China or the National Association of Financial Market Institutional Investors.

Many drop out during the long waiting process or simply avoid the market altogether. But not Portugal.

The European sovereign waited two years before it sold its first Panda. During that time, it needed to submit supplementary material to the Chinese regulators on its ageing population and its policies to support the banking sector. This was in addition to the typically arduous paper work it had to file for its issuance.

But Portugal’s patience and persistence paid off. Its Panda had a large order book, reflecting the popularity of its credit story. The three year note was priced at 4.09%, which was 74bp over the three years China Development Bank yields. Additionally, Portugal was able to swap the proceeds back into euros and repatriate them offshore. Bank of China and HSBC were the joint lead underwriters and Caixa Geral de Depósitos was the financial adviser.

With the deal, Portugal made itself known to the Chinese onshore bond market and domestic investors, who embraced the newcomer. It has also paved the way for other Eurozone countries to head to China.