The Asian Development Bank (ADB) joined the International Finance Corp (IFC) in the nascent Panda bond market yesterday (October 12) raising Rmb1 billion ($123 million) to on-lend to projects on the Mainland. Both the IFC and ADB will have the same issue date for their 10-year deals, although the latter priced two days later than the former after opting to conduct roadshows in Shanghai and Beijing.
After canvassing 100 investors, the order book was formally opened by lead manager BOCI Thursday morning with pricing guidance set at 3% to 3.39%. After accumulating orders totaling Rmb3 billion, the deal was priced at par on a coupon of 3.34%.
The ADB's decision to formally market the deal appeared to pay off, as it was able to fix pricing 6bp inside the IFC deal, which came at 3.4% on Tuesday. At the time of pricing, 10-year government bonds were being quoted at 3.15%.
ADB Assistant Treasurer Juan Limandibrata says the two supranationals needed to come at a premium to the government bond market because of their different tax treatment. "Only domestic Treasury bonds are exempt from income tax," he explains. "That's the main reason for the 19bp premium."
Like the IFC, the ADB will also be using funds onshore and Limandibrata believes he will be back into the Panda bond market, "sooner rather than later" to fund the suprnational's project base on the Mainland. Given there is no cross currency swap market, he also says comparisons with the supranational's usual deep sub Libor funding costs are fairly meaningless.
"China has a very interesting domestic bond market and we were very happy with all aspects of this transaction," he comments. "BOCI handled themselves well and we found the bookbuild very transparent. It was also illuminating to see just how large the domestic investor universe is."
Limandibrata says about 30 investors participated in total, of which domestic banks accounted for 39%, foreign banks 31%, insurance companies 15%, with the remainder comprising fund management companies, credit co-operatives and social security funds.
Having achieved a long cherished ambition on the Mainland, Limandibrata says the supranational's next target will be closer to home, with plans for an inaugural Peso-denominated bond now at an advanced stage.
