The New Development Bank (NDB) on April 2 priced what it called a coronavirus-combating bond amounting to five billion yuan (US$705.22 million) in the China interbank bond market (CIBM) that generated strong investor demand.
The three-year offering, priced at the lower end of the announced marketing range, attracted demand from a high-quality and diversified investor base, both onshore in China as well as offshore. This represents the largest-ever yuan-denominated bond as well as the first yuan-denominated coronavirus-combating bond issued by a multilateral bank in China.
The aim of the transaction, according to the NDB, is to support the Chinese government’s financing of public health expenditures in Hubei, Guangdong and Henan province, which have been hit the hardest by Covid-19. The bond proceeds will be fully used to finance the 7 billion yuan emergency assistance programme loan to China approved by the NDB’s board of directors on March 19 2020. This loan will contribute to improving the resilience of the public health sector in the three provinces.
“Since the outbreak of Covid-19 in December 2019, the lives of people and the economy have been heavily impacted,” says NDB vice-president and chief financial officer Leslie Maasdorp. “NDB is fully committed to supporting our member countries fighting the spread of Covid-19 and stands ready to provide the necessary financing.”
The coronavirus-combating bond met with robust demand from investors. The offering was more than three times oversubscribed with the final order book in excess of 15 billion yuan. The bond distribution was well-balanced between onshore and offshore investors, with 41% of the paper allocated in China, 45% in Europe, the Middle East and Africa, and 14% in the Asia-Pacific region, excluding China.
Central banks and official institutions accounted for 54% of demand, banks and bank treasuries, 45%, and securities investors, 1%. The high-quality final order book and its notable participation from central banks and official institutions is a testament to the strength of the NDB’s credit quality.
The bond issue is strategically relevant to NDB’s mandate of promoting sustainable development and deepens the bank’s commitment to raise funding in the local currency of its member countries, notes Maasdorp. “The funding from NDB will specifically provide much-needed emergency support during this period of crisis in which our member countries are facing new economic challenges and human hardship.”
The Industrial and Commercial Bank of China was the lead underwriter and bookrunner for the transaction, while the Bank of China, Agricultural Bank of China, and China Construction Bank acted as the joint lead underwriters.
The NDB was established by Brazil, Russia, India, China and South Africa (BRICS) to mobilize resources for infrastructure and sustainable development projects among member countries, other emerging economies, and developing nations by complementing the existing efforts of multilateral and regional financial institutions for global growth and development.
To fulfill its purpose, the NDB will support public or private projects through loans, guarantees, equity participation and other financial instruments. According to the NDB, sustainable infrastructure development is at the core of its operational strategy for the 2017-2021 period.
In July 2016, the NDB successfully issued its first green financial bond amounting to 3 billion yuan with a tenor of five years in the CIBM and its first Panda bond amounting to 3 billion yuan in February 2019, also in the CIBM.
