Creative structuring
Citic Securities is IFR Asia’s China Bond House for 2023 for its ability to come up with new structures and utilise its global platform to win business in a year fraught with challenges for China.
China-focused bond houses all had a tough year with China G3 bond volume down by 45% year on year in the wake of the property crisis, weak economy and cheap onshore rates keeping issuers local. But Citic managed to maintain its leading position in the market, as number one in the China onshore market and top Chinese bank in the China G3 bond league table.
It printed Rmb1.7trn (US$238bn) in the onshore renminbi market, leading just under 4,000 issues, and US$1.7bn offshore, giving market shares of 7.5% and 4.8%, respectively.
Citic stood out for its creativity as it brought existing borrowers to the market in new ways. Its “reverse issuance” idea made it the sole lead underwriter for State Grid Overseas Investment’s Panda bond, beating bank competitors which have strong lending relationships with the issuer’s central state-owned parent.
Citic advised the Hong Kong-based company to tap the onshore market for a cheaper cost, but with a guarantee from the parent State Grid Corp of China, solving the challenge that the subsidiary itself did not have relationship banks onshore.
Discussions about the unusual Panda structure were already underway when new rules were put in place in 2023, which made it clear that proceeds of onshore issuance could be used offshore. Citic played a key role in explaining the structure to regulators to reassure them that State Grid would only use the proceeds for offshore refinancing.
The Rmb1bn 2.87% three-year note achieved a 50bp cost saving compared to a US dollar issue, attracted a mix of onshore and offshore investors, and provided a structure that was replicable for others. CGNPC International followed with a Rmb2bn five-year Panda guaranteed by state-owned China General Nuclear Power Corp, for which Citic was a joint lead underwriter.
Citic also arranged for a Hong Kong lender the first Tier 2 Panda bond, which took one year of preparation and coordination with regulators to clarify standards for bank capital. It successfully brought in investors including offshore asset managers for the 10-year non-call five note, a tenor which onshore investors usually find difficult to accept.
The securities house’s global platform gave it the edge over its rivals, enabling it to distribute deals widely and execute a number of private placements for South-East Asian financial institutions.
In addition to Panda bonds, Citic was a leading player in onshore REIT bonds and was active in the Shanghai (China) Free Trade Zone market, another international fundraising channel. It also led Dim Sum offerings for municipal governments, such as Shenzhen’s first offshore social responsibility bonds.
To see the digital version of this report, please click here
To purchase printed copies or a PDF, please email shahid.hamid@lseg.com