China names 13 banks for dollar bond deal

    A file photo of Chinese 100 yuan banknotes seen on a counter of a branch of a commercial bank in Beijing, China. (Reuters Photo)
    A file photo of Chinese 100 yuan banknotes seen on a counter of a branch of a commercial bank in Beijing, China. (Reuters Photo)

    HONG KONG- China’s government has mandated 13 investment banks to lead a US dollar sovereign bond deal, according to a term sheet seen by Reuters, its third since its international debt issuance program was revived two years ago.

    The term sheet showed there will be four tranches of bonds, which have not been rated by any agency. A person familiar with the transaction said the tranches would be three-, five-, 10- and 20-years in maturity.

    It would be the third transaction since 2017 when China launched its first US dollar bond in 13 years.

    The 2017 deal raised $2 billion while a separate transaction in 2018 raised another $3 billion.

    Refinitiv data shows US dollar-denominated debt makes up 7.54 percent of China’s total outstanding debt.

    China sold its first euro-denominated bond earlier in November, raising $4.4 billion, or 1.02 percent of the country’s debt pool, according to Refinitiv.

    A banker with direct knowledge of the transaction said China would likely seek to raise more than $3 billion, in line with the size of last year’s deal.

    The term sheet for the transaction, which is due to begin Tuesday, shows the Chinese government has appointed Bank of China and Bank of Communications to lead the deal.

    China’s government has also mandated Bank of America Securities, China Construction Bank, China International Capital Corporation (CICC), Credit Agricole, Taiwan’s CTBC Bank, Deutsche Bank, Goldman Sachs, HSBC, JPMorgan, Mizuho Securities and Standard Chartered Bank.

    Meanwhile, a commentary in the Communist Party’s official People’s Daily said on Monday China’s financial regulators should lower barriers for small banks to replenish their capital, and develop more tools to help them raise funds.

    Listed small and medium-sized banks have a limited ability to raise funds externally and have limited tools for issuing capital replenishment bonds, the commentary said.

    “Regulators should consider designing diversified and differentiated means and indicators and implement differentiated regulation to better guide small and medium-sized banks forward on the road of differentiated development,” it said.

    Beijing is trying to soothe investor concerns about troubled smaller lenders as economic growth slows to near 30-year lows.

    State-backed investors became key shareholders in Harbin Bank this month in a $2 billion deal.

    Earlier this year, regulators took control of Inner Mongolia’s Baoshang Bank, citing “serious” credit risks and improper and significant illegal use of bank funds.

    The newspaper commentary said that only by improving corporate governance and solving problems including shareholder-related transactions and insider control, and improving internal management models can small banks respond to changes in the market environment. – Reuters