PRIVATE & CONFIDENTIAL
Bank of China Debt Capital Markets Capabilities Market Outlook 2020
Bank of China Limited January 2020
0 Content
BOC Capabilities 2
Market Developments and Outlook 9
Case Studies 20
DCM Team 54
Green Bond Developments 56
1 Experience and Capabilities - Top Asian Debt Capital Market Franchise
EM Bonds 2019 League Table (bln USD) Bookrunner Rank Vol Issues
Global coverage with DCM Centre established across key financial centers – Beijing, Hong Kong, Singapore and London. Bank of China 1 89.4 646
Citics 2 69.2 575 Global footprint with diversified investor base and solid relationship with major global investors who could provide supportive anchor orders, especially in Asia. ICBC 3 66.1 482 China Securities 4 64.7 577
Global Global Strong support from in-house investment book with a potential credit line for corporate names. Citi 5 62.2 451
Coverage HSBC 6 61.7 581 Strategy partner in RMB transactions. Guotai Junan 7 54.5 525 Asian top underwriter for G3 issuance, and the only leading underwriter in both China Onshore and Offshore market. JP Morgan 8 51.6 346 CICC 9 48.3 350 Standard Chartered 10 43.5 440
2019 2019 2019 2019 2018 2018 2018 2017
Logicor Financing CPI Property SA PPF Arena 1 CEZ Group EP Infrastructure Agricultural Development EUR EUR Ministry of Finance of the EUR 500 million due 2022 Bank of China Luxembourg People’s Republic of China EUR 1,850 million EUR 550 million EUR 550 million Senior Unsecured Bond EUR750 million Transactions Senior Unsecured Bond Subordinated Bond Senior Unsecured Bond Co-Manager Senior Unsecured Bond EUR 500 million EUR 2 billion EUR 4 billion Multi-tranche Joint Bookrunner and Joint Joint Bookrunner and Joint Joint Bookrunner and Joint Joint Bookrunner and Joint Green Bond Senior Unsecured Bond Eurobond Lead Manager Lead Manager Lead Manager Lead Manager Joint Global Coordinator, Joint Global Coordinator, Joint Bookrunner and Joint Joint Bookrunner and Joint Joint Bookrunner and Lead Manager Lead Manager Joint Lead Manager
2019 2019 2019 2019 2019 2019 2018 2018
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Veolia CASA CDP BMW Finance NV United Overseas Bank New Development Bank Hungary The Emirate of Sharjah RMB RMB
Transactions RMB 1 billion 1 year RMB 1 billion 3 year RMB 1 billion 3 year RMB 6.5 billion 1/3 year RMB 2 billion 3 year RMB 3 billion 3/5 year RMB 2 billion Panda Bond RMB 2 billion Panda Bond Panda Bond Panda Bond Panda Bond Panda Bond Panda Bond Panda Bond after RMB 1 billion in 2016 Lead Bookrunner and Lead Lead Bookrunner and Lead Bookrunner and Lead Bookrunner and Lead Bookrunner and Lead Bookrunner and Joint Lead Bookrunner and Lead Bookrunner and Lead Manager Lead Manager Lead Manager Lead Manager Lead Manager Lead Manager Joint Lead Manager Manager
2019 2019 2019 2018 2018 2017 2016 2016
Republic of Philippines Sinopec CNOOC Ministry of Finance of the Saudi Arabia Ministry of Finance of the Saudi Arabia China Development Bank USD USD 2 billion Multi-tranche USD 1.5b Multi-tranche People’s Republic of China People’s Republic of China USD 1b/ EUR 1b (Jan ) USD 1.5 billion Senior Unsecured Bond Senior Unsecured Bond USD 11 billion Multil-tranche USD 17.5 billion Multil- USD 1.6b /EUR 1b (May ) Transactions Senior Unsecured Bond Joint Global Coordinator, Joint Global Coordinator, USD 3b Multi-tranche Senior Senior Unsecured Bond USD 2b Dual-tranche Senior tranche Senior Unsecured USD 1.5b (Jun ) Joint Global Coordinator, Joint Bookrunner and Joint Joint Bookrunner and Joint Unsecured Bond Joint Bookrunner and Joint Unsecured Bond Bond USD 350m/ EUR 500m (Oct ) Joint Bookrunner and Joint Lead Manager Lead Manager Joint Global Coordinator, Lead Manager Joint Global Coordinator, Joint Bookrunner and Joint Joint Bookrunner and Joint Lead Manager Joint Lead Manager Joint Lead Manager Lead Manager Lead Manager 2 Source: Bloomberg as of 06 Jan 2020 *in Bold selected EMEA transactions Credentials - Growing Market Presence
Bank of China has Asia ex-Japan G3 Currency League Table 2013 (bln USD) Asia ex-Japan G3 Currency League Table 2019 (bln USD) improved its Asia ex- Japan G3 Currency Bookrunner Rank Vol. (bn USD) Issues Bookrunner Rank Vol. (bn USD) Issues League Table Position HSBC 1 15.4 139 HSBC 1 28.6 323 from no. 10 in 2013 to Deutsche Bank 2 11.9 107 Standard Chartered 2 18.6 234 top 4 in 2019; and ranks Citi 3 11.2 100 Citi 3 16.2 177 Goldman Sachs 4 10.9 59 no 2 in Offshore China Bank of China 4 15.5 264 JP Morgan 5 10.7 87 Bonds in 2019, with 5x JP Morgan 5 11.0 129 Standard Chartered 6 9.6 74 UBS 6 10.4 143 of underwriting volume UBS 7 8.9 87 since 2013. Bank of America Merrill CACIB 7 10.4 99 Lynch 8 7.9 73 Credit Suisse 8 10.2 130 Barclays 9 6.9 56 Haitong Securities 9 9.8 197 Bank of China 10 5.1 58 Deutsche Bank 10 9.4 116
2013 2018/2019YTD
Offshore China Bonds League Table 2013 (bln USD)* Offshore China Bonds League Table 2019 (bln USD)* Bookrunner Rank Vol. (bn USD) Issues Bookrunner Rank Vol. (bn USD) Issues HSBC 1 9.5 176 HSBC 1 33.1 612 JP Morgan 2 8.6 106 Bank of China 2 21.8 491 UBS 3 8.3 205 CACIB 3 17.9 383 ICBC 4 7.3 87 Nomura 4 17.1 654 Goldman Sachs 5 6.7 58 UBS 5 11.1 207 Standard Chartered 6 6.6 142 DCS Group 6 10.9 227 Citi 7 6.5 101 Haitong Securities 7 10.2 244 BGC Partners LP 8 5.6 35 Scotiabank 8 10.2 303 ICAP 9 5.6 54 Bank of Comms 9 10.0 215 Bank of China 10 4.7 95 CCB 10 9.7 243
Source: Bloomberg, 07 Jan 2020 * Chinese issuers in G3 currency
3 Bank of China is the Leading Panda Bond House
Issuer Name Deal Eff Date Cpn Amount Issued Curr Maturity Series League Table: Veolia 17/12/2019 3.70 1,500,000,000 CNY 17/12/2020 PPN Panda Bond Issuance 2019 Credit Agricole 04/12/2019 3.40 1,000,000,000 CNY 05/12/2022 Daimler AG 13/11/2019 Multi 5,000,000,000 CNY Multi PPN Bookrunner Rank % BMW Finance NV 21/10/2019 Multi 3, 000,000,000 CNY Multi PPN Bank of China 1 45.73 Daimler AG 12/08/2019 Multi 5,000,000,000 CNY Multi PPN ICBC 2 19.48 Cassa Depositi e Prestiti SpA 31/07/2019 4.50 1,000,000,000 CNY 01/08/2022 BMW Finance NV 12/07/2019 Multi 3, 500,000,000 CNY Multi PPN Citics 3 13.59 Malayan Banking Bhd 21/06/2019 Multi 2,000,000,000 CNY Multi HSBC 4 4.77 Portugal 30/05/2019 4.09 2,000,000,000 CNY 03/06/2022 Stand Chartered 5 3.02 Trafigura Group Pte Ltd 20/05/2019 5.49 540,000,000 CNY 20/05/2022 PPN ABC 6 2.77 Philippine 15/05/2019 5.00 2,500,000,000 CNY 20/05/2022 CCB 6 2.77 United Overseas Bank 07/03/2019 3.49 2, 000,000,000 CNY 14/03/2022 BMW Finance NV 04/03/2019 4.00 3, 000,000,000 CNY 08/03/2022 PPN BNP Paribas 8 2.49 New Development Bank BRICS/The 19/02/2019 Multi 3, 000,000,000 CNY Multi China Securities 9 1.96 Hungary Government International Bond 19/12/2018 4.30 2, 000,000,000 CNY 19/12/2021 CDB 10 1.91 Daimler AG 22/11/2018 Multi 4,000,000,000 CNY Multi PPN Trafigura Group Pte Ltd 28/09/2018 6.20 700,000,000 CNY 28/09/2021 PPN Daimler AG 15/08/2018 4.50 1,000,000,000 CNY 20/08/2021 PPN League Table: Daimler AG 15/08/2018 3.70 3,000,000,000 CNY 20/08/2019 PPN Panda Bond Issuance 2016-2018 Veolia Environment SA 09/08/2018 4.00 1,000,000,000 CNY 10/08/2019 PPN Trafigura Group Pte Ltd 22/05/2018 6.50 500,000,000 CNY 24/05/2021 PPN Bookrunner Rank % Daimler AG 09/05/2018 Multi 5,000,000,000 CNY Multi PPN Bank of China 1 42.94 Trafigura Group Pte Ltd 27/04/2018 6.50 500,000,000 CNY 27/04/2021 PPN ICBC 2 35.93 Philippine Government International Bond 13/03/2018 5.00 1,460,000,000 CNY 23/03/2021 HSBC 3 8.59 Air Liquide Finance SA 05/03/2018 Multi 2,200,000,000 CNY Multi PPN Emirate of Sharjah Government International Bonds 29/01/2018 5.80 2,000,000,000 CNY 02/02/2021 Standard Chartered 4 3.55 Mizuho Bank Ltd 12/01/2018 5.30 500,000,000 CNY 16/01/2021 PPN China Int’l Capital 5 2.11 MUFG Bank Ltd 12/01/2018 5.30 1,000,000,000 CNY 16/01/2021 Haitong Securities 6 1.43 Daimler AG 10/01/2018 5.60 3,000,000,000 CNY 12/01/2021 PPN China Development Bank 7 1.42 Province of British Columbia Canada 17/11/2017 4.80 1,000,000,000 CNY 23/11/2020 ABC 8 0.98 Daimler AG 15/11/2017 5.45 4,000,000,000 CNY 17/11/2020 PPN United Co RUSAL PLC 04/09/2017 5.50 500,000,000 CNY 04/09/2020 China Merchants Securities 8 0.98 Daimler AG 22/08/2017 5.12 5,000,000,000 CNY 24/08/2020 PPN CCB 10 0.71 Hungary Government International Bond 21/07/2017 4.85 1,000,000,000 CNY 27/07/2020 Malayan Banking Bhd 17/07/2017 4.60 1,000,000,000 CNY 24/07/2020 Bank of China executed 40 of 44 Daimler AG 16/05/2017 Multi 4,000,000,000 CNY Multi PPN United Co RUSAL PLC 17/03/2017 5.50 1,000,000,000 CNY 20/03/2020 Panda bonds within the EMEA region, Daimler AG 14/03/2017 4.60 3,000,000,000 CNY 15/03/2018 PPN and awarded the Best Panda Daimler AG 08/11/2016 Multi 4,000,000,000 CNY Multi PPN bond house National Bank of Canada 28/10/2016 3.05 3,500,000,000 CNY 03/11/2019 in both 2018 and 2019. Veolia Environment SA 01/09/2016 3.50 1,000,000,000 CNY 02/09/2019 PPN Republic of Poland Government International Bond 22/08/2016 3.40 3,000,000,000 CNY 26/08/2019 Source: Bloomberg, 07 Jan 2020 New Development Bank BRICS/The 13/07/2016 3.07 3,000,000,000 CNY 19/07/2021 Note: Panda Transaction from Foreign Issuers Daimler AG 4 15/06/2016 3.48 4,000,000,000 CNY 17/06/2017 PPN BOC Executed Deals in Red Province of British Columbia Canada 14/01/2016 2.95 3,000,000,000 CNY 25/01/2019 Bank of China Green Capabilities
BOC has been committed to promoting the development of Sustainable Finance
The Bank of China Limited (“BOC”), as a leader in China’s green finance development, was deeply involved in the GFSG (the G20 Green Finance Study Group) meetings. We are also part of ICMA’s Green Bond Committee. From the meetings, BOC has determined to build more experience in green finance and to contribute to the internationalization of the domestic Green Bond market BOC London participated the G20 Sustainable Finance Study Group (SFSG) technical meetings hosted in London in 2018.
During China’s G20 Presidency, the G20 Green Finance Study Group (“GFSG”) was established and was co-chaired by the People’s Bank of China and the Bank of England. The GFSG was formed to explore ways to mobilise private sector funds to finance green investments globally
Green Bond Issuance Asia 2019 (bln USD) China accounts 18% of global issuance BOC is a leading green bond underwriter (selected examples below)
Bookrunner Rank Vol ($m) Issues
HSBC 1 3.13 38 180 2016 2017 2018 2019 Bank of China 2 2.33 26 Geely Holding Group Three Gorges Group SSE PLC SSE PLC 160 CACIB 3 2.06 26 Joint Bookrunner 140 Joint Global Coordinator Joint Global Coordinator Joint Bookrunner Morgan Stanley 4 1.81 39 USD 400m EUR 650m EUR 650m EUR 650m 120 Sumitomo Mitsui Financial 5 1.69 39
ICBC 6 1.65 22 100 BOC is a leading green issuer in offshore green market
bn
ABC 7 1.59 21 80 USD
CCB 8 1.54 17 60 in 2016 2017 2017 2018 Standard Chartered 9 1.53 25 40 BOC New York BOC London BOC Paris BOC London
issued BOC Luxembourg USD 1.5b Citi 10 1.49 21 20 USD 3b Green Bonds USD 5m Green Bond USD 1b 5 Tranches in 3 Green Covered Bond 3 Tranches in 3 Green Bond Source: Bloomberg, Climatebonds, 07 Jan 2020
Amount 0 currencies 1 Tranches in USD currencies 2 Tranches in USD
2015 2016 2017 2018
Other countries issuance (aligned with intern'l definitions) 2018 2018 2019 2019 BOC HK BOC Tokyo BOC Macau BOC Macau China’s issuance (aligned with both Chinese and intern'l USD 380m USD 350m USD 2billion definitions) HKD 3b Green Bond Green Bond/Sustainable RMB/Sustainable Sustainability Bond 2 Tranches in 2 2 Tranches in 2 Green Bond 2 Tranches China’s issuance (aligned with Chinese definitions only) 1 Tranches in HKD currencies currencies in 2 currencies
5 Bank of China - Leading RMB House in 2019
Best Panda bond house Most impressive FIG issuer Bank of China Bank of China
“For the second year in a row, Bank of China stood out among Panda “For the second year running, Bank of China is GlobalCapital bond underwriters, making it the winner of the Best Panda Bond House 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 .” award for 2019 government’s policy agenda through debt issuance, but also introduced different novel structures to the market, both onshore and Foreign issuers are also increasingly paying attention to the bank’s advantages in offshore.” the Panda market. During our awards period, Bank of China was mandated on several landmark Panda deals. Some of them opened a new funding channel for foreign issuers while others introduced a new asset class to onshore investors. Most impressive corporate issuer BMW
“Among the notable deals were the first Panda bond from Portugal, which opened Bank of China acted as Lead Bookrunner up the market to eurozone issuers. Then there was the tightly priced and well- “BMW was not the only corporate issuer to tap the Chinese onshore executed Panda by repeat issuer the Republic of the Philippines. In addition, a renminbi liquidity this year. Daimler, Trafigura and Veolia senior preferred TLAC-eligible Panda by Crédit Agricole introduced a novel capital Environnement have all ventured into the Panda bond market. In the instrument to the China market.” auto ABS market, manufacturer Dongfeng Nissan and US auto company Ford have been frequent issuers. But no other corporation “Bank of China was also not short of mandates from Daimler and BMW. The has had the same level of breadth and diversity as the German Chinese bank was the lead underwriter on all five private placement Panda bonds automaker.” sold by the two German automakers. Where there was a Panda deal to be done, there was Bank of China.” Most impressive SSA issuer Portugal GlobalCapitalChina Awards 2019 Bank of China acted as Lead Bookrunner “Many SSA issuers stood out during our awards period. However, with this award, GlobalCapital Chinais recognising an SSA issuer that set an example for others to follow. In this case, it was Portugal….stood out as its Rmb2bn ($285m) Panda bond opened up Eurozone countries to China’s bond market.”
6 Bank of China – Leading China Capital Markets
China Bond House: Bank of China Renminbi bond: Portugal’s Rmb2bn Panda Bank of China was the Lead Bookrunner Growing reach International appeal
“Bank of China added a growing focus on innovation to its already strong underwriting “The Portuguese Republic made a commanding debut in the Chinese capabilities in 2019, leveraging on its global network to inaugurate new products and new market with a Rmb2bn (US$284m) three-year Panda bond, attracting markets for Chinese issuers…. a strong order book as the first eurozone sovereign and only the third
European sovereign to sell bonds in China.” BOC again topped the underwriting table for G3 bonds from China with US$11.7bn of volume and a 6.4% market share during IFR’s review period. “The debut issue gave Portugal a significant presence in the
Chinese capital market and could help pave the way for Leveraging its relationships in a wide range of industries, BOC arranged offshore bonds for corporate issuers in Portugal who might have demand for Chinese local government financing vehicles, central state-owned enterprises, financial financing in renminbi.” institutions and property developers, which dominated a record year for Asian high yield.
BOC also played a key role in China’s a €4bn (US$4.4bn) triple-tranche sovereign deal in IFR Asia Awards 2019 November, the nation’s first euro trade in 15 years, which drew robust demand and set a sound benchmark for Chinese corporates.
Beyond China, other landmark deals included Asian Infrastructure Investment Bank’s US$2.5bn debut, the Philippines’ US$1.5bn global bond, and Sri Lanka’s two global bond offerings that raised a total US$4.4bn.”
IFR Asia Awards 2019
7 International Awards Recognition
Global Awards Bond Awards
2019 – Global Capital China (Best Panda House) 2019- Global Capital China (Most impressive FIG/corporate/SSA issuer)
2019- Euromoney Rewards for Excellence - World's best bank in the emerging 2018 – Airline Economics (Asia-Pacific Debt Deal and Asia-Pacific Bank of the Year)
markets 2019: Bank of China 2018 – Finance Asia (Best Investment Grade Bond”, ”Best Belt and Road Bond”, “Best Hong Kong Deal)
2019 – Climate Bonds (Largest Emerging Markets Green Bonds Underwriter) 2017 – Finance Asia (Best DCM House in Hong Kong)
2018 – GlobalRMB China Capital Markets (Best Panda House) 2016 – Finance Asia (China Best DCM House)
2018 – IFR Asia (China Bond House) 2016 – IFR Asia (China Bond House)
2018 – Caixin Media (Best China Onshore Bond House/Best China Panda Bond Underwriter/Best 2016 – IFR Asia (SRI Bond)
China G3 Currency Bond House) 2016 – The Asset (China Best Green Bond DCM Team)
2018 – The Asset (Best Bond Adviser-Global and Best Bond Adviser-Domestic) 2016 – The Asset (China Best G3 Currency Bond House)
2018 – Asiamoney (Best Corporate & Investment Bank” and “Best Overall Bank for Belt and Road 2016 – The Asset (Best Financial Institution Green Bond)
Initiatives) 2016 – Caixin Capital Market Achievement Award (China Best G3 Currency Bond House)
2017 – Finance Asia (Best DCM House in Hong Kong) 2015 – Asia Money (Best Bond Issuance)
2017 – The Asset (Best Bond Adviser – Global) 2015 – Finance Asia (China Best DCM Team)
2016 – IFR Asia (Asian Bank of the Year) 2015 – The Asset (Best DCM house in Hong Kong)
2015 – Finance Asia (Best Financial Institution) 2015 – Finance Asia (Best Offshore RMB Bond Deal)
2015 – Finance Asia (Best Bank Loan) 2014 – IFR Asia (China Best Bond Underwriter) th 2014 – Fortune (Ranked 95 in the list of Fortune Global 500 enterprises) 2014 – The Asset (China Best Bond Underwriter)
2011 – 2014 – IMF (Systemically Important Financial Institution) 2014 – Finance Asia (Best Offshore RMB Bond Deal)
2013 – IFR Asia (Asia Pacific Best RMB Clearing Bank) 2013 – The Asset (China Best Bond Underwriter)
2013 – Euromoney (China Best Cash Management Bank) 2013 – Global Finance (China Best Foreign Exchange Provider, China Best Trade Finance Bank, China Best Corporate Bank)
2013 – Trade Finance (Best Trade Finance Bank in China)
2013 – The Asset (Best Service Provider in Trade Finance of China) 8 2012 – The Banker (Bank of the Year in China) 2012 – Euromoney (China Best Bond Underwriter & Best Private Bank) 8 2012 – The Asian Banker (Best Trade Finance Bank in China) Outlook 2020
9 2020 Outlook – the Year of Choices and Geopolitical Risks
In 2019, global economic growth looks to have fallen to a post-financial crisis low due to slowdowns in the US, Europe, and China. Although the labor market and consumption remained relatively healthy, fixed investment and trade growth weakened as the US-China trade conflict impacted business confidence.
With interest rates already close to, at, or below zero, the effectiveness of traditional monetary policy is now diminished, leaving us to consider the role of fiscal policy in stimulating growth.
While recent data suggest the euro zone’s downturn may be bottoming out and tensions in the U.S.-China trade war may be easing, economists aren’t counting on the ECB making major revisions to its China’s competition with the US in the economic, technological, and geopolitical forecasts. They still see a recession as a near-term risk. spheres creates an ongoing challenge to the previous world order that will not be easily resolved. In an era of “de-globalization,” the trade dispute between the two nations could flare up again in 2020, even if the phase one deal is reached.
Elections will take place in the US and, Brexit negotiation will continue in 2020. Geopolitics and regional conflicts will periodically disturb issuance windows. However, as we have seen early January, the market sentiment remains very strong and investors are willing to put their liquidity to work. We expect EM to benefit, especially if USD might weaken.
10 EUR issuance will have a continued boost by market technicals in 2020…We believe the outlook for European fixed income markets will heavily depend on the trajectory of economic growth and inflation.
• European Central Bank (ECB) kept its rates unchanged in December following • We expect the ECB will continue to do its utmost to support growth and inflation new President Christine Lagarde’s first monetary policy meeting. in the euro zone. Additionally, the change at the helm of the ECB—from Mario Draghi to Christine Lagarde—could result in the implementation of more • The ECB Governing Council voted to keep the main deposit rate at the innovative measures and more pressure on national governments to stimulate historic low of -0.5%, in line with market expectations, while the marginal their economies through fiscal measures. lending facility remained at 0.25%. • We believe sovereign bond yields should stay at historically low levels and • The ECB’s statement reiterated that rates will stay at the current level or would expect yield curves to steepen if expectations begin to reflect the lower until the central bank has seen the inflation outlook “robustly possibility of moderately rising inflation. converge” to a level close to but below 0.2% and that underlying inflation has remained consistently convergent with that level. • Credit spreads in near term are well supported by the mixed economic outlook, resilient corporate balance sheets, and positive momentum in corporate • The ECB led by Governor Lagarde is currently reviewing the policies and tools earnings. available and this review expected to continue over 2020, therefore we do not expect any substantial changes in the ECB near term decisions.
ECB October meetings Jan 23 March 12 April 30 June 4 July 16 Sep 10 Dec 10 29 2020
11 The outlook for EM fixed income markets will heavily depend on Geopolitics, the US dollar developments and Central Banks‘ accommodative policy stance.
US Treasury Actives Curve
• Central banks face an increasingly challenged policy outlook. Monetary policy 3.0 ammunition is running low as interest rates are near historic lows. We see further rates cuts from Fed in 2020 but not very aggressive easing. 2.5
• The market expects the US dollar to weaken over the course of 2020. In recent years, 2.0 high interest rates, risk aversion stemming from the downturn in global trade, and support from earnings repatriation have supported the USD. But over the coming 1.5 year(s) US growth and interest rates will be closer to those elsewhere in the world, and uncertainty ahead of the US election and the waning effect of tariffs suggest a weaker US currency is likely. 1.0
• As rates decreased about 90 bps in 2019, investors continued hunting for the yield and 0.5 we expect this trend to continue. 0.0 • If we see any inflationary pressure re-appearing, investor might switch to shorter 1M 2M 3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 25Y 30Y duration assets. I25 US TREASURY ACTIVES CURVE Last Mid YTM I25 US TREASURY ACTIVES CURVE 6M Mid YTM
FED meetings Jan 29 March 18 April 29 June 10 July 29 Sep 16 Nov 5 Dec 16 2020
Source: BOC, Bloomberg as of 07 Jan 2020
12 Macro Stability is Key Priority for 2020
Global monetary policy may further ease in 2020, yet the room is constrained as Monetary policy should be stable in 1H20 as CPI growth rises to much higher interest rates are at historical lows. We do not expect the aggressive cuts in the near than the 3% target. But we see increasing possibility of RRR and LPR cuts in term from the PBOC, but gradual adjustment if required. H2 2020 as consumer inflation and property investment growth go down.
• China has moderately eased monetary policy with RRR cuts in 2019 and targeted credit buyout for private business, while maintaining tightening stance for property and control over local government contingent debt. Actual results are mixed as loans to manufacturing and small business grew faster than loans to LGFVs, yet still slower than loans to property.
• In December, The PBOC’s decision cut the required reserve ratio (RRR) for commercial banks by 50bp, which brought the ratio for large banks to 12.5% effective from Jan 6, has boosted market sentiment. The PBOC estimates that the cut will release RMB800bn into the financial system. But it is worth bearing in mind that the actual impact on the economy will probably be smaller than this figure implies. For one thing, the usual cash crunch around Chinese New Year (which falls relatively early this year on 25th January) will offset much of the liquidity released. Moreover, remember that China now has a hybrid monetary policy regime where short-term interest rates act as the key policy target. This constrains the amount of liquidity that can be kept outstanding in the financial system.
• Rather than broad easing, the aim of the RRR cut appears to be to lower financing costs Source: Bloomberg 07 Jan 2020 for commercial banks in order to boost lending, particularly to SMEs. This is consistent with officials’ recent approach of providing only moderate policy support. As a result, we remain of the view that the current market expectations of rate cuts worth 50-100bp are too aggressive. In our view, policy rates will be cut relatively gradually over the weeks ahead.
• The CPI inflation, which rose in November to above 4% for the first time since 2011, will be a constraint. But given that underlying price pressures remain low (core inflation fell to 1.4% last month, the lowest rate in years), we think officials will look through the headline rate and push interest rates gradually lower in coming months.
• Global central banks have responded to the economic slowdown by easing monetary policies. China spearheaded the policy easing by cutting RRR and easing the liquidity condition, while Eurozone and Japan put a brake on QE exit or increased asset purchase. The US Fed has cut its policy rates three times this year while market still expects additional easing in 2020. 13
Business sentiment likely to improve with Sino-US phase one deal
Moderate Growth Going Forward The recent message from the annual Central Economic Work Conference in • Q319 GDP growth at 6% YoY, in line with our expectation. According to the National December 2019 was that to achieve the expected targets for 2020, China will Bureau of Statistics (NBS), China’s GDP grew 6% YoY (all on year-on-year basis below unless make ensuring stability a top priority, and uphold the policy framework of stable otherwise specified) in 3Q19, compared with 6.2% in 2Q19 and 6.4% in 1Q19. China has macro policies, flexible micro policies, and social policies that ensure basic needs launched moderate policy easing with RRR cuts and tax reduction to boost the private are met. business confidence. Although China and the US may reach a partial trade deal by the end of this year, uncertainty still exists to restrain business investment. China GDP YoY (%) • China’s economy saw temporary stabilisation in November as most indicators beat 14 expectations. The industrial output notably bounced up with the manufacture PMI coming 12 back to the expansionary territory. The fixed asset investment (FAI) stabilised temporarily 10 with strong growth in property investment and further pickup in infrastructure investment. The retail sales also mildly recovered as the auto sales narrowed the YoY declines. 8 6 • The phase one US- China deal indicates the two countries will cease fire at least in the 4 short term, which should boost market confidence and business sentiment. Some foreign trade and supply chain activities may recover in the coming months. But the two sides still 2 hold some key issues unsolved. The recent progress may only moderately improve business 0 confidence and the lingering future uncertainties may still weigh on business investment decisions. We expect the economy may see further mild slowdown with the GDP growth down from 6.1% in 2019 to 5.8% in 2020.
• China will maintain proactive fiscal policy in 2020 as the downside pressure on growth USD/CNY Rate calls for additional policy support yet rising consumer inflation restrains monetary policy 7.30 room. General fiscal deficit and local government special bond quota may increase from 7.20 2.8% and 2.2% of GDP in 2019 to 2.9% and 2.7% of GDP in 2020. We expect possible 7.10 additional small-scale tax cuts, but big-scale tax cut is unlikely as the government faces 7.00 increasing pressure from fiscal imbalance. 6.90 6.80 • Renminbi is likely to see mild appreciation against US dollar in 2020 as the US and China 6.70 may reach a partial deal. US$/RMB spot rate is expected to reach 6.85 at end-2020 6.60 compared to 7.05 at end-2019. 6.50 6.40
14 Source: 07 Jan 2019 Loan Prime Rate Reform
Term Shibor (%) Interbank The reform to the Loan Prime Rate (LPR)* announced in August 2019 is a further step in China’s transition towards an Repo( %) interest rate targeting, market driven, monetary policy regime. Overnight 1.0030 1.00
China has a hybrid interest rate system where both market-based and regulated interest rates are used in the economy. In 1W 2.2190 1.85 the interbank market, short-term rates are largely liberalised and the People’s Bank of China (PBOC) adjusts liquidity via its open market operations. But for long-term bank loans, interest rates are still set based on the 12-month benchmark lending 2W 2.0910 1.95 rate, which is set by the PBOC. One key drawback of this arrangement is that policymakers cannot influence interest rates across the economy by adjusting short-term interest rates. Officials have talked about merging the “dual track” of interest 1M 2.7470 2.50 rates for some time as a result. The reform to the Loan Prime Rate announced this year marked a significant step toward this goal. 3M 2.9200 2.60 The LPR was initially introduced in 2013 and has historically tracked the benchmark lending rate. But from 20th August, it will instead be determined based on quotations from 18 commercial banks (up from 10 previously) that are submitted to 6M 2.9600 3.00 the central bank as a spread relative to the PBOC’s Medium-term Lending Facility (MLF) rate. A 5-year LPR rate was introduced in addition to the current 1 year rate. 9M 3.0050 3.50
It is also worth bearing in mind that the LPR rate will only affect new loans. All outstanding loans are still priced off of the 1Y 3.0500 3.50 benchmark rate, which will continue to exist for the foreseeable future. In any case, the two lending rates probably will not diverge dramatically in the near-term. Although the new LPR will likely be more sensitive to changes in market conditions, it Term LPR (%) will still be guided by officials. For now at least, policymakers will probably keep a close eye on the spread banks set above the MLF rate to ensure that the LPR does not fluctuate wildly. 1Y 4.15
The Shanghai Interbank Offered Rate (or Shibor, http://www.shibor.org/shibor/web/html/index_e.html) is a 5Y 4.80 daily reference rate based on the interest rates at which banks offer to lend unsecured funds to other banks in the Shanghai wholesale (or "interbank") money market. Shibor is not used as the reference for corporate loans. RRR 12.5%
In addition, investors are tracking repo-rates with the volume-weighted average rate for the benchmark seven-day repo in the interbank market, considered to be the best indicator of general liquidity in China Interbank Bond Market.
•The LPR quotation group is comprised of 18 commercial banks, which expands from the original 10 basis, increasing urban commercial banks, rural commercial banks, foreign-invested banks and private banks, 2 for each respectively. The panel banks submit quotations to NIFC (National Interbank Funding Center (NIFC)), with 0.05% as step length, before 9:00 am (GMT+8) on the 20th day of each month (holidays postpone). NIFC calculates the arithmetic average of the quotations, after removing the highest and lowest quotes, and approximates to the integral multiple times of the 0.05% to conclude the final LPR. At 9:30 am (GMT+8), LPR is released to the public on the websites of NIFC and PBOC.
Source: Bloomberg, SHIBOR 07 Jan 2020 15 RMB Market Dynamics
AAA-rated 3-year Levels (%) AAA Corporate Secondary Performance and Monthly Changes
4.50 0 4.00 2 Yield Curves 1Y 3Y 5Y 7Y 10Y 3.50 4 3.00 2.50 6 AAA Curve (%) 3.12 3.36 3.70 3.93 4.21 2.00 8 1.50 10 1.00 1M Change (bps) (7) (11) (10) (6) (4) 0.50 12 0.00 14 1Y 3Y 5Y 7Y 10Y
Change 1M (RHS) Today 1M
We expect the central bank would maintain ample liquidity BOC China Onshore-Offshore Bond Yield Difference supply to facilitate moderate credit growth in 2020. The 200 possibility of RRR and base rate cut is higher in 2H20 than 1H20 0 as consumer inflation gradually declines in the second half of -200 the year. -400 -600 -800 -1000 -1200
This Index tracks the yield differentials between offshore and onshore RMB bonds on a comprehensive, objective and synchronized basis. The index selects index-qualified 3-year (the mainstream tenor of offshore RMB bonds) offshore and onshore RMB corporate bonds as constituents. The index and its sub-indices calculate the weighted average of YTM difference between the onshore and offshore markets. A positive level indicates a higher yield condition onshore versus offshore. Greater the value, larger the yield differentials, and vice versa.
16 Source: Bloomberg, 07 Jan 2020 RMB Market Dynamics
CDB 3-YR Yield Developments (%) CDB Bond Yield Curve
4.0 0 3.5 2 Yield Curves 1Y 3Y 5Y 7Y 10Y 3.0 4 6 2.5 8 2.0 CDB Bond (%) 2.57 2.96 3.36 3.54 3.57 10 1.5 12 1.0 14 1M Change (bps) (16) (8) (10) (7) 0 0.5 16 0.0 18 1Y 3Y 5Y 7Y 10Y
Change 1M (RHS bps) Today 1M
CNH USD CCS Developments (%) CNH/USD 3yr Cross Currency Swaps (CCS)
3.2 3.2
3.0 3.0
2.8 2.8
2.6 2.6
2.4 2.4
2.2 2.2
2.0 2.0 1M 3M 6M 1Y 3Y 5Y 7Y 10Y
Today 1M 3M
17 Source: Bloomberg, 07 Jan 2020 China Marco Update
Change in CPI (% YOY) Change in PPI (% YOY) China Manufacturing PMI SA China Non-Manufacturing PMI SA 6.0 56 55 5.0 54 4.0 53 3.0 52 2.0 51 50 1.0 49 0.0 48 -1.0 47 -2.0 46
Figure 1: China change in CPI vs. PPI Figure 2: China Manufacturing and Non-manufacturing PMI
12.0 China Macroeconomic Developments 10.0 PMI remained in expansionary territory in December. The Non-Manufacturing 8.0 PMI recorded 50.2 in December, the same as November. It was the second 6.0 month that PMI bounced back to the expansionary territory.
4.0 The improvement was witnessed in both the production and demand side. The 2.0 production index increased from 52.6 in November to 53.2 in December. The new order index reached 51.2 in December, compared to 51.3 in November. 0.0 The purchase price for materials rebounded in December, the PPI Index for materials rebounded from 49 in November to 51.8, thanks to the rebalance of supply and demand after the latest slowdown cycle. The industrials prices may Total Retail Sles of Consumer Goods (% YOY) mildly rebound in 2020 as we expect the PPI to raise 0.6 in 2020 after dropping Fixed Asset Invesntment (Excl. Rural Households % YOY) 0.4 in 2019. Industrial Value Added ( % YOY)
Figure 3: Macro development indicators
18 Source: Bloomberg, 07 Jan 2020 Execution Timing Consideration in H1 2020
JANUARY FEBRUARY MARCH APRIL May June M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T W T F S S M T W T F S S 1 2 3 4 5 1 2 1 1 2 3 4 5 1 2 3 1 2 3 4 5 6 7
6 7 8 9 10 11 12 3 4 5 6 7 8 9 2 3 4 5 6 7 8 6 7 8 9 10 11 12 4 5 6 7 8 9 10 8 9 10 11 12 13 14
13 14 15 16 17 18 19 10 11 12 13 14 15 16 9 10 11 12 13 14 15 13 14 15 16 17 18 19 11 12 13 14 15 16 17 15 16 17 18 19 20 21
20 21 22 23 24 25 26 17 18 19 20 21 22 23 16 17 18 19 20 21 22 20 21 22 23 24 25 26 18 19 20 21 22 23 24 22 23 24 25 26 27 28
27 28 29 30 31 24 25 26 27 28 29 23 24 25 26 27 28 29 27 28 29 30 25 26 27 28 29 30 31 29 30
30 31
Issuance Windows (post 2019 results) UK/EU Holidays ECB expected to be busy ahead of the Easter and May Holidays breaks US Holidays Fed Rate Decision China holidays
USD: We expect busy mid January in USD ahead of Chinese New Year Holidays. The cut off date for an issuance based on Q3 2019 results (Reg S/144A) is February 12 2020. We expected busy March and late April post the Easter break ahead of May 14 cut off date for the issuance based on 2019 results (Reg S/144A).
EUR: We expect busy March as some issuers will come out from a black out period reporting 2019 results in February/early March as well as end of April ahead of May holidays for borrowers reporting late March.
19
Case Studies
20 BOC’s Offshore Debt Distribution Network and Capabilities
BOC’s Offshore Debt Distribution Network and Capabilities
BOC’s Head Office set up its Global Markets business through its Hong Kong Branch. With Hong Kong, Singapore and London as its regional centers, BOC’s Head Office directs and coordinates both onshore and offshore branches and subsidiaries
Europe Detail Ireland UK Netherlands Poland Belgium Germany Luxembourg France Switzerland Spain Italy Russia Canada Monaco
South Korea Turkey China United States Japan Bahrain India Mexico Thailand Taiwan Cayman Islands Saudi Arabia UAE Panama Colombia Malaysia Indonesia Singapore Brazil Zambia
Chile South Africa Australia Uruguay New Zealand Argentina
Head Office Global Market Business Overseas Platform (BOC Hong Kong Branch)
DCM Centre (Asia) DCM Centre (EMEA)
21 Joint Lead Underwriter and Joint Lead Bookrunner - Ministry of Finance of the People’s Republic of China - Multi Tenor EUR Transaction Key Terms
Issuer The Ministry of Finance of the People’s Republic of China Coupon 0.125% / 0.50% / 1.00% Size EUR 2b / EUR 1b / EUR 1bn Spread MS+30bp / MS+40bp / MS+58bp Ranking Senior Unsecured Law/Listing English/LSE ISM and Euronext Paris Format Reg S Clearing Clearstream Ratings - Maturity 12 Nov 2026 / 12 May 2031 / 12 Nov 2039 Issue Date 05 Nov 2019 Tenor 7Y / 12Y / 20Y
China’s Successful Return to the Euro Market
• On 5 Nov 2019, The Ministry of Finance of the People’s Republic of China successfully launched their first Euro Sovereign bond since 2014. This EUR4bn triple-tranche deal drew robust demand and set a benchmark for Chinese corporates in the euro market. This successful triple-tranche issuance comprises of EUR2bn 0.125% bond in 7-year tenor priced at MS+30bps, EUR1bn 0.500% bond in 12-year tenor at MS+40bps and EUR1bn 1.00% bond in 20-year tenor at MS+58bps. The pricings were 15-22bps tighter than their initial guidance (MS+45-50bps for 7-year, MS+60-65bps for 12-year and MS+75-80bps for 20-year). Bank of China acted as the Joint Lead Manager and Joint Bookrunner.
• The unrated transaction has attracted orders from a wide range of global investors such as dedicated emerging market investors, but also Continental European pension funds and insurance companies as well as considerable orders from central banks, this highlighted investor confidence in Chinese sovereign credit. The total subscription amount was around EUR20bn, about 5 times over-subscribed. Across the tranches, only c. 35% of total allocation went to Asia, with 60% going to Europe and 5% to US offshore. This distribution confirms that the MoF China with this transaction has managed to reach a new investor base in Europe and achieved a considerable investor diversification. • The success of this transaction is likely to encourage further Chinese corporates to tap the Euro market and demonstrates the depth of investor demand for high-quality Chinese and Asian credits.
22 Joint Lead Underwriter and Joint Lead Bookrunner - Ministry of Finance of the People’s Republic of China - Multi Tenor EUR Transaction Key Terms
Issuer The Ministry of Finance of the People’s Republic of China Coupon 0.125% / 0.50% / 1.00% Size EUR 2b / EUR 1b / EUR 1bn Spread MS+30bp / MS+40bp / MS+58bp Ranking Senior Unsecured Law/Listing English/LSE ISM and Euronext Paris Format Reg S Clearing Clearstream Ratings - Maturity 12 Nov 2026 / 12 May 2031 / 12 Nov 2039 Issue Date 05 Nov 2019 Tenor 7Y / 12Y / 20Y
7Y 12Y 20Y
INVESTOR BY TYPE INVESTOR BY TYPE INVESTOR BY TYPE
9% 2% 4% 3% 13% 20% 31% 34% 39% 22% 39% 7% 26% 9% 42%
CB/Official Institutions CB/Official Institutions CB/Official Institutions AM PF/Ins Banks/PB HF/Other AM AM PF/Ins PF/Ins INVESTOR BY REGION INVESTOR BY REGION INVESTOR BY REGION
8% 9% 13% 12% 2% 8% 19% 11% 25% 33% 34% 27% 37% 30% 27%
UK Germany UK Germany UK Germany Other Europe Asia Other Europe Asia Other Europe Asia US Offshore/other US Offshore/other US Offshore/other 23 Joint Global Coordinator - Agricultural Development Bank of China Dual tranche transaction: CNH 2.5 billion 3-year and CNH 3 billion 5-year Green Dim Sum Bond Key Terms
Issuer ADBC Coupon 3.180% / 3.400% Size CNH 2.5 billion / CNH 3 billion Interest base Fixed Ranking Senior Unsecured Law English Format Reg S Clearing Euroclear/Clearstream/CMU Ratings A1/A+/A+ (Moody’s/S&P/Fitch) Maturity 06 Nov 2022 / 06 Nov 2024 Issue Date 30 Oct 2019 Tenor 3Y / 5Y
3 YEAR INVESTOR BY TYPE 5 YEAR INVESTOR BY TYPE • On 30 Oct 2019, Agricultural Development Bank of China, the only agricultural policy bank in China, issued another green bond in accordance with their ‘ADBC 6% 1% 2% Green and Sustainability Bond Framework’. The dual tranche green bonds is 17% 17% proposed to list across Hong Kong Stock Exchange, Luxembourg Stock Exchange and China Europe International Exchange, London Stock Exchange and MOX.
76% 81% • The proceeds for the 3-year bond is for financing and/or refinancing of the eligible green assets as described under the Bank’s Green and Sustainability Bond Framework, while the 3-year is for finding the general credit business, working Banks/FI CM/Ins/SSA FM/AM/PB Bank/FI FM/AM CB PB/Other capital and GCP.
3 YEAR INVESTOR BY REGION 5 YEAR INVESTOR BY REGION • The bond attracted lots of high-quality investors, including central banks, sovereign funds, banks, Investment banks, funds and asset management 12% 13% companies. It was almost 3 times oversubscribed (final book was over CNH 13 billion) with 3-year from 36 accounts and 5-year from 40 accounts.
88% 87%
EMEA Asia EMEA Asia 24 Joint Lead Manager & Joint Bookrunner - SPDB London Branch USD 300 million Inaugural Green Bond 3-year
• On 24 October 2019, Shanghai Pudong Development Bank London Branch issued an inaugural USD ALLOCATION BY BOOKRUNNERS 300 million green bond. 11% • The proceeds is to finance and/or refinance loans to assets or projects that contribute to energy conservation and emission reduction, while building resilience to climate change.
89% • The bond attracted lots of high-quality investors. The final book size was over USD 2.6bn (more than 8x oversubscribed) across 43 accounts. Bank of China Other 15 JBRs .
INVESTOR BY TYPE
12% 1%
87% Key Terms Bank AM/FM/Ins Issuer SPDB London Coupon FRN Corp/PB/Other Size USD 300 million Spread 3mL+70 bps
Ranking Senior Unsecured Law English INVESTOR BY REGION Format Reg S Clearing Euroclear/Clearstream Ratings Baa2/BBB/BBB (Moody’s/S&P/Fitch) Maturity 20 Oct 2022 11% Issue Date 24 Oct 2019 Tenor 3Y
89%
Asia EMEA 25 Active Bookrunner: Logicor GBP Senior Secured Deal
Distribution On 10 Oct 2019, Bank of China arranged for Logicor, one of the largest European warehouse and logistics Asset/Fund Managers 1% company, to issue its first senior secured Sterling bond. 1% UK This is the second largest Sterling deal of the year among 35% 7% Insurance/Pension Funds corporate issuers. 63% Hedge Fund/PB Rest of The initial price thoughts were UKT+175bps for the 7- Europe year deal, post three days of roadshow in London and 93% SWF Edinburgh. The transaction attracted GBP 1.8bn book before its final pricing guidance. The scale of interest
Key Terms allowed company to tighten 15 bps and landed at UKT + 160bps with final book size of 1.6bn. Bank of China sales Issuer Logicor 2019-1 UK Plc Coupon 1.875% covered around 70% of the total book. Issuer Rating -/BBB/- Final UKT+ 160 bps
Spread
Compared with Logicor’s existing EUR bond with the Rating Aa2/AA-/AA Format Senior Secured, Reg S same tenor, the deal was 80 bps cheaper. This is due to the senior secured structure, and positive technicals in Tenor 7 year Law English the Sterling bond market amid lack of corporate supply.
Issue Size GBP 900million Listing Irish GEM Listing
Issue Date 10 Oct 2019 Reoffer 1.924%(s/a) yield
26 Joint Global Coordinator – Three Gorges Group Dual Tranche Transaction USD 850mln 5-year and 30-year Key Terms
Issuer Three Gorges Finance I (Cayman Islands) Limited Coupon 2.300% / 3.200% Guarantor China Three Gorges Corporation Spread T+95bps / T+112.4bps Size USD 500mln / USD 350mln Law New York Format Senior Unsecured / Reg S Listing SGX Ratings A1/A/A+(Moody/S&P/Fitch) Maturity 16 Oct 2024 / 16 Oct 2049 Issue Date 09 Oct 2019 Tenor 5Y / 30Y
5 YEAR INVESTOR BY TYPE 30 YEAR INVESTOR BY TYPE • On 9 October 2019, China Three Gorges Group (CTG), the state-owned hydropower company in China, successfully raised USD 850 million through a 5% 9% 7% dual transaction. 24% • This successful transaction represented the fourth transaction for Bank of 71% China with CTG, after participating in their first EUR 650 million offshore Green 84% Bond in 2017 (which was also the first green EUR bond transaction from a Chinese Non-Financial enterprise), USD 700/EUR 700 million IN 2016 and USD 1.5 billion bonds issued in 2015. Banks AM/FM Broker Dealer/Others Bank AM/FM Brokers / Dealers
• Both transactions attracted many high-quality investors. The final orderbook 5 YEAR INVESTOR BY REGION 30 YEAR INVESTOR BY REGION for the 5-year note reached USD 950m from 44 accounts, and USD 500m from 39 accounts the 30-year note. 7% 20%
93% 80%
EMEA Asia EMEA APAC 27 Joint Global Coordinator – CNOOC 10Y/30Y USD1.5 billion Dual Tranche 2019
Key Terms Bank of China successfully managed the transaction for CNOOC, one of the largest Issuer CNOOC Finance Limited Coupon 2.875%/ 3.300% Oil companies in China, as the Joint Global Guarantor CNOOC Limited Reoffer Yield 2.941%/ 3.300% Coordinator and Lead Bookrunner. Size (m) USD1,000/ USD500 Pricing Date 09/27/2019
Format SEC Registered Law New York Total book size for the 10-year tranche had approx. 2.3x over-subscription, and Ratings A1 (Moody’s)/ A+ (S&P) Tenor 10Y/ 30Y the 30-year tranche had approx. 3x over- Exchange HKEx Listing Reoffer Yield T+120bps/112bps subscription. 10Y USD1,000mm 30Y USD500mn
INVESTOR BY REGION INVESTOR BY REGION
7% 13% Asia Asia 32% US US 61% 32% 55% Other Other
INVESTOR BY TYPE INVESTOR BY TYPE
2% 7% AM AM 35% 30% Banks Banks 1% 56% 68% PF anf 1% PF anf SWFs SWFs
28 Joint Global Coordinator – Chinalco Capital Holdings Limited USD 750 mlillion PerNC5 Hybrid
• On 04 September, Chinalco Capital Holding Limited, Guaranteed by Aluminium Corporation of China, INVESTOR BY TYPE launched Perpetual NC5 USD 750 million bond. Bank of China acted as the Joint Global Coordinator and Joint Bookrunner. 2%
• Aluminium Corporation of China is a leading company in China’s non-ferrous industry, with a strong 14% portfolio of assets among global competitors. It is also the only large company in China’s aluminium industry that’s engaged in the whole value chain. Bank of China has been the active bookrunner for 52% all three USD bonds issued under Chinalco Capital Holding Limited. 32%
• Proceeds used for refinancing the group’s offshore existing indebtedness and for the development of offshore business. Fund/AM Corp/Ins Banks PB/Securities • The transaction was well received by investors and the final book reached USD 6 billion with orders from 185 accounts.
Key Terms INVESTOR BY REGION
Issuer Chinalco Capital Holdings Limited Coupon 4.100% Guarantor Aluminium Corporation of China Reoffer T + 278 bps Size USD 750 million Law/Listing English/HK 6% Ranking Senior Unsecured Clearing Euroclear/Clearstream Format Reg S Step-ups CoC call at 101% Ratings BBB+ Maturity PerNC5 94% Issue Date 04 Sep 2019 Tenor Perpetual
ASIA EMEA
29 Joint Global Coordinator – Shanghai International Port USD 800 million Dual Tranches 5-year and 10-year Key Terms
Issuer Shanghai Port Group BVI Dev Co Coupon 2.400% / 2.850% Guarantor Shanghai International Port Group Reoffer T+108 bps / T+140 bps Size USD 300m / USD 500m Law/Listing English/HK Ranking Senior Unsecured Reg S Clearing Euroclear/Clearstream Ratings A1 Maturity 11/09/2024 // 11/09/2029 Issue Date 04 Sep 2019 Tenor 5Y / 10Y
5Y – INVESOR BY TYPE 10Y – INVESTOR BY TYPE • On 04 September, Shanghai International Port launched its dual tranche offering of 5Y USD 300 million bond along with a 10Y USD 500 million bond. 2% 21% Bank of China acted as the Joint Global Coordinator and Joint Bookrunner. 20% 46% 12% • Proceeds used for refinancing the group’s offshore existing indebtedness and 1% 66% for other general corporate purposes. 32% • The transaction was well received by investors and the final book for 5-year tranche reached USD 2.7 billion with orders from 81 accounts, including USD AM/FM Ins/SWF PB Banks AM/FM Banks Ins/SWF PB 630 million JLM interest, and the 10-year tranche reached USD 2.4 billion with 5Y – INVESTOR BY REGION 10Y – INVESTOR BY REGION orders from 116 accounts, including USD 200 million JLM interest
4% 4%
96% 96%
EMEA Asia Asia EMEA 30 Active Bookrunner - Logicor 2-Tranche Transaction EUR 1.85 billion 5-year and 8-year Key Terms
Issuer Logicor Financing SARL Coupon 0.75%/1.625% Size EUR 850mln / EUR 1billion Spread MS+110bps / MS+170 bps Ranking Senior Unsecured Law English Format Reg S Listing Irish GEM Listing Ratings -/BBB/- Maturity 15 Jul 2024 / 15 Jul 2027 Pricing Date 15 Jul 2019 Tenor 5Y/8Y
5Y – INVESOR BY TYPE 8Y – INVESTOR BY TYPE • On 8 July 2019, Logicor, the largest owner of logistics real estate in Europe, made 3% the second drawdown of EUR 1.85 billion under its EMTN programme this year, 10% 14% 2% consisting of an EUR 850m 5-year and EUR 1bn 8-year fixed rate offerings. Logicor 4% 4% took EUR 900m out of the market in two tranches on April 25 2019 (2 year and tap 6% of 2028) targeting predominately short-end investor base.
83% 75% • The initial price thoughts were MS+130-135bps and MS+190-195 bps for 5-year and 8-year, respectively. The transaction attracted EUR 3.9bn book at the launch, which was skewed towards the longer end. The scale of interest allowed company AM Banks/PBs HF Ins/Pf AM Banks/PBs HF Ins/PF Others to tighten 22.5 bps for both tranches, and also Logicor upsized its size target. Bank 5Y – INVESTOR BY REGION 8Y – INVESTOR BY REGION of China sales covered around 70% of the total order book.
3% 4% • Favourable market encouraged the issuer to bring forward the funding plan from 22% 29% H2 2019 and conclude their EUR funding target for 2019. 44% 3% 2% 2% 11% 54% 3% 12% 7% 5%
Benelux France Germany/Austria BeNelux France Germany/Austria Iberia/Italy Switzerland UK Iberia/Italy Switzerland UK Other Other 31 Joint Lead Manager - Marks and Spencer Plc GBP 250 million 8-year
• On 3 July 2019, Bank of China successfully arranged for Marks & Spencer a GBP250mln 8-year deal. The initial INVESTOR BY TYPE price guidance was Mid Gilts+300-310bps, before GBP 2 billion of demand allowed them to tighten that spread by 35bps. 4% 4% 6% • The orderbook fell to GBP1.65 billion following the revision, and landed at Mid Gilts+270bps. The deal was 8% well-received by investors on the back of strong demand for yield, despite a Brexit-fuelled drop in consumer confidence.
• The deal includes a 125 basis-point step-up if the company loses investment-grade status. 67%
• The bond was 71% distributed to investors based in the UK &Ireland, and Fund Managers contributed to 78% Fund Managers Insurance/Pension Fund of allocation. Official Institution Banks Others
Key Terms INVESTOR BY REGION
Issuer Marks and Spencer Plc Coupon 3.25% 8% 4% Size GBP 250 million Spread Mid Gilts+270 bps Ranking Senior Unsecured Law English 17% Format Reg S Clearing Euroclear, Clearstream Ratings Baa3(Stable)/ BBB-(Neg) (Moody’s/S&P) Maturity 10 Jul 2027
Pricing Date 03 Jul 2019 Tenor 8Y 71%
UK &Ireland Germany & Swizerland France Other
32 Joint Lead Underwriter and Joint Lead Bookrunner - Asian Infrastructure Investment Bank USD 2.5 billion 5-year Inaugural bond
• On 9 May 2019, Bank of China successfully arranged a 5-year USD 2.5 billion inaugural transaction for Asian INVESTOR BY TYPE Infrastructure Investment Bank (AIIB). The final pricing of MS+6bp has positioned AIIB among the very top supranational names and the spread to US Treasuries is also the tightest for a 5 year issue this year for a supra- 5% 2% national.
25% • AIIB is a multilateral development bank with a mission to improve social and economic outcomes in Asia with 97 approved members worldwide. All three major rating agencies assigned AAA ratings to AIIB. The transaction is registered with the SEC and listed on the London Stock Exchange. 67%
• The highly anticipated debut bond issue attracted over USD 4.4 billion orders from over 90 investors across 27 countries, reflecting the attention and recognition of global institutional investors to AIIB. The distribution is in line with premium supranational peers with very high quality SSA investors including central banks and CB/OI Bank Fund Manager Insurance/ Pension international organisations strongly represented.
• It is particularly notable that the deal benefited from early Indications of Interest and anchor orders out of Asia that helped drive the momentum and subsequent pricing of this inaugural landmark global transaction. Asian investors contributed over half of the total order book. Bank of China was the only Chinese active bookrunner. Key Terms INVESTOR BY REGION
Issuer Asian Infrastructure Investment Bank Coupon 2.25% 16% Size USD 2.5 billion Spread MS+6 bps Ranking Senior Unsecured Law New York Format SEC Registered Clearing DTC, Euroclear, Clearstream 49% Ratings Aaa/AAA/AAA (Moody’s/S&P/Fitch) Maturity 16 May 2024 35% Pricing Date 09 May 2019 Tenor 5Y
Asia Europe America
33 Joint Lead Manager and Joint Bookrunner - Logicor 2-tranche transaction EUR 900 million 2-year and 9-year, tap on existing 28’ Key Terms
Issuer Logicor Financing SARL Coupon 0.500% / 3.250% Size EUR 600mln / EUR 300mln Spread MS+70bps / MS+220 bps Ranking Senior Secured Law/Listing English / Irish GEM Listing Format Reg S Clearing Euroclear / Clearstream Ratings -/BBB/- Maturity 30 Apr 2021 // 13 Nov 2028 Issue Date 25 Apr 2019 Tenor 2Y/9Y tap on existing 28’
2Y – INVESOR BY TYPE 9Y – INVESTOR BY TYPE • On 25 Apr 2019, Logicor, the largest provider of logistics real estate in Europe, made a second drawdown of EUR 900m from its EMTN programme, consisting of 5% 7% 14% a 600m two-year fixed-rate offering, and a 300m tap of its 3.25% November 1% 2028s. Logicor made its bond market debut in November 2018 with a EUR 1.8bn 6% 29% 55% three-tranche transaction. 74% 3% • The initial price thoughts were MS+100bps and MS+230/235bps area for 2-year 5% and tap tranche respectively . The short-dated bond was strongly bid and investors placed over EUR 3.35bn order, allowing issuer to cut spread from 100bps to 70bps AM Banks/PB HF Ins/PF Others AM Banks/PB HF Ins/PF Others over swaps. Books for the tap closed at over EUR 850m and spread tightened 12.5 2Y – INVESTOR BY REGION 9Y – INVESTOR BY REGION bps to 220bps over swaps.
4% 7% 4% 12% • The barbell approach approved successful and helped the company lock in an 23% attractive average spread. 36% 19% 39% 2% 19% 5% 2% 26% 2% Benelux France Germany/Austria Benelux France Germany/Austria Iberia/Italy Switzerland UK Iberia/Italy Switzerland UK Other Other 34 Joint Lead Manager & Joint Bookrunner - ICBC Singapore Branch USD 1.8 billion Multi-Currency Green Bond
• On 16th April 2019, as the Joint Bookrunner, Bank of China successfully assisted ICBC Singapore Branch in issuing the first multi-currency “One Belt, One Road” interbank normalization mechanism green bond, including a 3-year 900 million USD floating bond, 5-year 600 million USD floating bond and 3-year 500 million EUR fixed bond. The final issuance price of the 3-year 900 million USD floating bond is 3mL+72bps, which is 23 basis points tighter than the IPG; 3mL+83bps and 22 bps tighter for 600 million USD floating bond; MS+48 bps and 22 bps tighter for the 3-year 500 million EUR fixed bond.
• As the largest Chinese financial institution green bond since this year, the proceeds are mainly used for qualified green asset financing/refinancing in the “Belt and Road” countries and regions. The issuance aims to promote the “One Belt, One Road” inter-bank normalization cooperation mechanism.
• The offering has been sought after by more than 200 investor accounts in sovereign, super-sovereign institutions, banks, asset management companies, funds and private banks in Europe, the Middle East and Asia Pacific. The 3-year USD is over subscript by more than 2.6 times, 2.5 times for 5-year USD and 3.6 times for 3-year EUR.
• As a joint bookrunner, BOC has invested and brought sole orders of 220 million USD and 10 million EUR, effectively driving the order book and helping customers successfully complete this issuance.
Key Terms
Issuer ICBC Singapore Branch Coupon FRN/FRN/0.25% Size USD 900m / USD 600m / EUR 500m Spread 3mL+72bps/3mL+83bps/MS+48bps Ranking Senior Unsecured Law/Listing English/Singapore Stock Exchange Format Reg S Clearing Euroclear/Clearstream Ratings A1/A- Maturity 25 Apr 2022/ 25 Apr 2024/ 25 Apr 2022 Issue Date 25 April 2019 Tenor 3Y/5Y/3Y
35 Joint Lead Manager & Joint Bookrunner - ICBC Singapore Branch (Cont’d) USD 1.8 billion Multi-Currency Green Bond
3-year 900 million USD floating 5-year 600 million USD floating investors 3-year 500 million EUR fixed investors investors types distribution types distribution types distribution
Banks 2% 5% Banks 14% 25% Life Insurance 1% Banks Sovereign 40% 47% AM/Funds Private Banks 48% 7% Funds/Corps/Priv Funds Sovereign/Supra ate Banks 85% 26% Sovereign Private banks/Others
Investors region distribution Investors region distribution Investors region distribution
8% 8%
42%
68%
92% 92%
36 Asia Europe and Middle East Asia Europe and Middle East Asia Europe and Middle East
36 Joint Global Coordinator – Sinopec 5Y/10Y/30Y USD2 billion Multi-Tranche Offering
Key Terms Bank of China successfully managed the transaction for Sinopec, the Issuer Sinopec Group Coupon 2.500%/2.95%/3.44% frequent borrower in USD market. Guarantor China Petrochemical Corporation Reoffer Yield 2.53%/3.006%/3.44%
Size (m) USD700/USD1,000/ USD300 Pricing Date 11/04/2019 5-year transaction was over 2x Format SEC Registered Law New York oversubscribed with demand close USD1,500 mln 73 accounts. Ratings A1 (Moody’s)/ A+ (S&P) Tenor 10Y/ 30Y Exchange HKEx Listing Reoffer Spread T+93/T+122/3.44% 10-year transaction was over 2.8x over subscribed with demand close 5Y USD700 mm 10Y USD1,000 mm 30Y USD300 mn USD2,800 mln 140 accounts. INVESTOR BY REGION INVESTOR BY REGION INVESTOR BY REGION 30-year transaction was over 2x over subscribed with demand close 7% 17% 10% USD700 mln 48 accounts. 24% Asia Asia Asia 49% US US 53% US 30% EMEA EMEA 27% 83% EMEA
INVESTOR BY TYPE INVESTOR BY TYPE INVESTOR BY TYPE
1% AM 1% AM 11% AM 29% 22% 29% Banks Banks Banks 54% 58% 13% 59% 23% CB and CB and CB and Insurance Insurance Insurance
37 Joint Lead Manager and Joint Bookrunner - CPI Property Group SA EUR 550 million PerpNC6.5 Hybrid Bond
• On 9 April 2019, Bank of China successfully arranged for the leading CEE real estate group - CPI Property Group SA (Baa2/BBB) - an PerpNC6.5 EUR 550 million transaction. Use of proceeds would be to fund the company’s growth INVESTOR BY TYPE strategy and to refinance and/or repay existing liabilities. BOC acted as the Joint Bookrunner for this deal. 6% 8% • CPI Property Group is a leading long-term investor in income-generating real estate, primarily in Czech, Germany and CEE region. The group has signed EUR 510 million revolving credit facility in March 2019, which Bank of China 10% participated and strengthen our relationship with this important borrower.
• The initial price guidance was 5.500% area, before EUR 1.1 billion of demand allowed CPI to tighten the final guidance to 5.125%. The final order book maintained at EUR 800 million level after this revision. CPI took advantage 76% of the current issuance window and strong demand for risky assets. This successful placement was the second hybrid issuance of the issuer, and represented the fourth transaction for Bank of China in Czech Republic within the last 12 months. AM Banks Ins/PF HF Key Terms
Issuer CPI Property Group SA Coupon 4.875% Size EUR 550 million Spread MS+494.4 bps First Reset 16/10/2025 Issue Ratings Ba1/ BB+/ (Moody’s/S&P) On the First Reset Date and on every Format Reg S INVESTOR BY REGION annual Interest Payment Date thereafter. Call schedule Ranking Subordinated, Pari Passu with outstanding Hybrid Par call in the 3 months prior to and including the First Reset Date Listing Dublin 11% 27% Fixed, payable annually until First Reset Date (Short 1st 6% 16/10/2030 (25 bps); 16/10/2045 (further Coupon). Reset to the then 5Y Mid Swap Rate + initial Step-ups 75 bps) Interest spread to m/s + relevant step-up, on every 5th 8% CoC 500bps unless called at par anniversary thereafter, payable annually Withholding Tax Event, Change of Control and English, except for Subordination, which Substantial Repurchase Event (75%) at par. Tax 10% Special Law will be governed by, and construed in Deduction Event, Accounting Event, Capital Event (at 18% 20% Event Call accordance with Lux law 101% until the first optional redemption date, par thereafter) UK&Ireland France Yes, upon an Accounting Event, a Capital Event, a Tax Deduction Event or a Withholding Tax Event, subject to Substitution/ certain conditions (including terms of Qualifying Subordinated Notes not being materially less favorable to Italy Switzerland Variation Noteholders) Benelux Germany/Austria Other Issue Date 09 Apr 2019 Maturity Perpetual NC6.5 38 Joint Lead Manager and Joint Bookrunner - PPF Arena 1 B.V. EUR 550 million 7-year
• On 21 March 2019, Bank of China successfully arranged for the leading CEE telecommunication service INVESTOR BY TYPE provider PPF Arena 1 B.V. an EUR 550 million 7-year deal. Bank of China acted as joint bookrunner.
9% • PPF Arena 1, the holding company of O2 Czech Republic, CETIN and Telenor CEE, is turning to the bond market to refinance part of its term loan facility. The group bought Telenor CEE in 2018, closing syndication of a EUR 3.025 billion loan to back the acquisition, which was the largest loan syndication in the CEE region since 2011. 13% Bank of China CEE teams has a long standing relationship with PPF Group and participated in EUR 2.8 billion Lending Facility for PPF Arena 1. 65% 13% • The issuer began the roadshow on last Friday meeting investors in Prague, London, Frankfurt, Munich, Amsterdam and Paris. The initial price guidance was 3.250% - 3.375%, before EUR 1 billion of demand allowed them to tighten the final spread. The final order book maintained at EUR 877 million level from 98 accounts. AM Insurance / Pension PPF took the advantages from the current market condition and issuance window on the back of dovish Fed Banks/PBs Hedge Funds & Other statements.
• This successful placement was the debut issuance of the issuer, and represented the third transaction for Bank of China from Czech Republic. Key Terms INVESTOR BY REGION
Issuer PPF Arena 1 B.V. Coupon 3.125% 3% 4% 5% Size EUR 550 million Spread MS+286.6 bps 27% Ranking Senior Secured Law/Listing English/Dublin 8% Format Reg S Clearing Euroclear/Clearstream 8% Ratings Ba1/ BB+/BBB- (Moody’s/S&P/Fitch) Maturity 26 Mar 2026
Covenants Covenants apply CoC At 101% if paired with Rating Event 9% 12% 24% Issue Date 21 Mar 2019 Tenor 7Y UK Germany Czech Republic Austria France Benelux Switzerland Russia Other 39 Joint Lead Manager and Joint Bookrunner – APRR EUR 500 million 9-year
• On 10 Jan 2019, Bank of China successfully arranged for APRR an EUR 500 mln 9-year deal. The initial price INVESTOR BY TYPE guidance was MS+80-85bps, before EUR 1.6bn of demand allowed them to tighten that spread by 15bps. 7% 2% • The order book fell to EUR1.2bn following the revision, and landed at MS+65bps, equated to a new issue premium of around 10bps,which is broadly in line with the premium paid by other issuers with similar rating in the same week. 30% 61% • 61% of allocation was made to asset managers, while 30% to insurance & pension fund.
Asset Managers Insurance/Pension Fund Banks/PBs Hedge Fund
Key Terms INVESTOR BY REGION
Issuer Autoroutes Paris-Rhin-Rhône (APRR) Coupon 1.250% 4% Size USD 500 million Reoffer MS+65 bps 11% Ranking Senior Unsecured Law English 3% 2% Format Reg S Clearing Euroclear/Clearstream 40% 15% Ratings A-/ A- (S&P/Fitch) Maturity 18 Jan 2028
Issue Date 10 Jan 2019 Tenor 9Y 25%
France Benelux UK &Ireland Germany & Austria Southern Europe Swizerland Asia 40
RMB Case Studies
41 Joint Underwriter and Lead Bookrunner – Crédit Agricole S.A. RMB 1 billion 3-year Panda - First Eurozone G-SIB and First French Bank to Issue Panda bonds
• On Dec 4 2019, Bank of China led the first Panda Bond Transaction for Crédit Agricole S.A., acting as the Lead Bookrunner and Lead Underwriter. The transaction is the first Panda Bond offering from a French bank and from a Eurozone G-SIB financial Institution. It is also the first Senior Preferred Panda Bond and incorporates a standard so-called ‘bail-in’ language, contributing to making it eligible, to a limited extent, and subject to the European Regulatory approval, to TLAC. However, in the case of Crédit Agricole S.A., it has been publicly disclosed that the preferred senior debt is not included in the issuer’s TLAC ratio.
• This offering was issued under Crédit Agricole’s RMB 5 billion CIBM programme approved this year and the first tranche was RMB 1 billion. Crédit Agricole S.A. intends to become a repeat issuer in the fast-growing Panda market to fund its activities in China and further diversify its long term funding. The proceeds of this first Panda Bond issuance will be used to finance its wholly-owned banking subsidiary, Crédit Agricole CIB (China) Ltd., which has been growing its footprint in China to serve its international client base via domestic financing and capital markets transactions.
• In order to introduce its credit and capital structure, Crédit Agricole conducted with the help of Bank of China and CACIB comprehensive non-deal roadshows in 2018 and 2019 in Beijing, Shanghai, Shenzhen and offshore RMB centres such as Hong Kong and Singapore.
• This issuance priced at 3.40%, which represents a 35 basis points spread over the China Development Bank benchmark. The marketing of the transaction commenced at the range of 3.30% to 3.90% earlier this week. Crédit Agricole managed to price the transaction closer to the lower end of the pricing range due to strong demand with the final order book more than two times oversubscribed (2.49x cover ratio). The pricing outcome was comparable to top Chinese bank funding levels . Key Terms ALLOCATION BY SYNDICATE
Issuer Crédit Agricole S. A. Coupon 3.40%
Size RMB 1 billion (RMB 5 billion Programme) Spread CDB+35 bps 40%
Ranking Senior Preferred Law PRC
Moody's Aa3 (Stable), Standard and Poor's 60% Ratings Clearing Shanghai Clearing House A+(Stable), Fitch Ratings A+(Stable)
National Scale AAA (CCXI) Maturity 3-Year
Pricing Date 4 Dec 2019 Other CIBM Trading; Bond Connect Eligible Bank of China Other 7 Syndicate members
42 Lead Underwriter and Bookrunner - Daimler - First Panda Bond Issued by Corporate
• On 12 August 2019, Bank of China, the lead underwriter, successfully executed two Daimler PPNs. The total of RMB 5 billion panda bonds were its first Panda bond of the year. Both tranches were priced at the Issuance Volume (million) lower end of the price guidance range (3.5%-4.1% and 3.7%-4.4% respectively). 20,000 16,000 16,000
15,000 • RMB 2 billion at 3.68% due 13 Nov 2021, a two year transaction with 18 bps over AAA domestic 10,000 8,000 curve. The bond was 1.475 times over subscribed. 10,000 5,000 5,000 1,500 • RMB 3 billion at 4.04% due 13 Nov 2022, a three year transaction with 39 bps over AAA domestic - curve. The bond was 1.4 times over subscribed. 2014 2015 2016 2017 2018 2019 KEY TERMS
• BOC executed 24 transactions for Daimler AG Issuer Daimler AG Domicile Stuttgart, Germany Underwriter BOC (Germany-based automobile maker), since the first 26 Dec 2013, was first approved corporate to issue Registered Yes Currency RMB Issuance type PPN Panda bond in China’s interbank market. Ratings AAA/A2 (CCRC/ Moody’s) Accounting IFRS Use of proceed Onshore Deal Eff Date Amount (million) Currency Tenor (Year) Coupon Maturity • BOC, as the lead underwriter and book-runner, 14/03/2014 500 RMB 1 5.20 Mar 2014 successfully executed this first Corporate Panda 05/11/2014 1,500 RMB 1 4.60 Nov 2014 Bond. 09/04/2015 3,000 RMB 1 4.80 Apr 2015 23/11/2015 1,500 RMB 1 3.60 Nov 2015 • This deal has set a good benchmark for foreign 23/11/2015 500 RMB 2 3.90 Nov 2015 non-financial corporations to raise funding in the 15/06/2016 4,000 RMB 1 3.48 Jun 2016 CNY market. 08/11/2016 3,000 RMB 1 3.16 Nov 2016 08/11/2016 1,000 RMB 3 3.35 Nov 2016 • The issuer is Daimler AG, and the capital raised is 14/03/2017 3,000 RMB 1 4.60 Mar 2017 used in Daimler AG’s onshore businesses. 16/05/2017 3,000 RMB 1 5.18 May 2017 16/05/2017 1,000 RMB 3 5.30 May 2017 22/08/2017 5,000 RMB 3 5.12 Aug 2017 • Daimler, rated A2/A/A-, obtained AAA rating for 15/11/2017 4,000 RMB 3 5.45 Nov 2017 this bond issued by China Credit Rating Co. Ltd 10/01/2018 3,000 RMB 3 5.60 Jan 2018 (CCRC) 09/05/2018 3,000 RMB 3 5.18 May 2018 • The cost of private placement is about 10-20bps 09/05/2018 2,000 RMB 1 4.80 May 2018 higher than that of public offering. 15/08/2018 1,000 RMB 3 4.50 Aug 2018 15/08/2018 3,000 RMB 1 3.70 Aug 2018 22/11/2018 1,000 RMB 2 4.20 Nov 2018 22/11/2018 3,000 RMB 1 3.85 Nov 2018 • The First Panda Bond issued by Daimler was in 2014 12/08/2019 2,000 RMB 2 3.53 Aug 2021
12/08/2019 3,000 RMB 3 3.84 Aug 2022 • Total of 24 Panda Bonds in the amount of RMB57 13/11/2019 2,000 RMB 2 3.68 Nov 2021 billion have been issued. 13/11/2019 3,000 RMB 3 4.04 Aug 2022 43 Lead Underwriter and Lead Bookrunner - BMW Finance N.V. 2019 Renminbi Bonds (Series 3) RMB 2 billion 1-year (Tranche 1) & 1 billion 2-year (Tranche 2) (Bond Connect)
• BMW Finance N.V. successfully issued a dual-tranche RMB 3 billion Panda bond in China’s onshore Market on RMB 2bn 1Y ALLOCATION BY BOOKRUNNERS 17 October 2019. The private placement offering included a 1-year RMB 2 billon tranche (Tranche 1) and a 2- year RMB 1 billion tranche (Tranche 2). It was the second dual-tranche structure issued under BMW Finance N.V.’s Renminbi bonds issuance programme. 26% • The offering was the 3rd series bond under BMW‘s RMB 20 billion CIBM programme registered in 2019, after the inaugural 3 year RMB 3 billion issued in March 2019 and their first dual-tranche RMB 3.5 billion in July. BWM has mandated Bank of China Limited as the lead underwriter, along side one JLM and four financial advisors. This issuance benefitted from strong syndicate group support and widespread demand across 74% offshore and onshore investors, including eligible investors through Bond Connect.
• BMW Finance N.V. successfully priced through the secondary curve and auto sector comparables and Bank of China Other 6 Syndicate Members achieved levels within the pricing guidance of 3.20-3.80% for the Tranche 1 Bonds, and 3.40-4.00% for the Tranche 2 Bonds, despite onshore rates volatility during the execution. The 1-year Tranche 1 bonds achieved a 1.85x oversubscribed rate and were priced at 3.37%, which meant only 25 bps spread versus the AAA corporate credit curve and at the lower limit of the pricing range. The 2-year Tranche 2 bonds achieved a 2.03x oversubscribed rate, the final price was at 3.57%, about a 22 bps spread over AAA corporate credit curve. RMB 1bn 2Y ALLOCATION BY BOOKRUNNERS
• Bank of China is the leading bank in Corporate Panda Bond issuance pioneering deals for Daimler, BMW, 20% Veolia, Trafigura. Key Terms
Issuer BMW Finance NV Coupon 3.37% (1Y) / 3.57% (2Y) Guarantor BMW AG Spread AAA+25 (1Y) / AAA+22 (2Y) Size RMB 2 bn (1Y) / RMB 1 bn (2Y) Law PRC Law 80% Ranking Senior Unsecured Listing SCH Ratings A1 (Moody/s) / A+ (S&P) / AAA (CCXI) Maturity 21 Oct 2020 / 21 Oct 2021 Bank of China Other 3 Syndicate Members Pricing Date 17 Oct 2019 Tenor 1Y / 2Y 44 Lead Underwriter and Lead Bookrunner for the First Italian Panda Bond from an European National Promotional Institution - Cassa depositi e prestiti S.p.A • On July 31 2019, Cassa depositi e prestiti S.p.A (“CDP”, rated AAA by CCXI) successfully closed its first bond issue targeted to institutional investors operating in the China Interbank Bond Market (Bond Connect Included), for a nominal amount of 1 billion Renminbi (equal to approximately to 130 million euro), fixed rate, unsubordinated and unsecured. It is the first Panda Bond from an Italian issuer and from the European National Promotional Institutions (NPIs).
• The bonds were issued under the 5 billion RMB Renmimbi Bonds Programme of Cassa depositi e prestiti S.p.A. authorised by the People’s Bank of China, having a duration of 3 years (maturity August 2022), with an annual coupon of 4.50% and a price of 100%. In consideration of the orders received, higher than the amount offered, the final coupon was fixed at the low end of the range of 4.40% to 5.00% communicated to the market. The deal was placed predominately with onshore investors taking over 90% of the final book.
• The proceeds of the issue will be used to finance - directly, or through Chinese branches of Italian banks or through Chinese banks - branches or subsidiaries of Italian companies established in China, supporting their growth. Italy is the first Group of Seven (G7) nation to join the Belt and Road Initiative led by the Chinese government, the accord was signed in March 2019. This Panda Bond Transaction expands Italy and China’s cooperation further to capital markets. The CDP Group’s role is strategic in this cooperation process, as it is already present in China with many subsidiary companies.
• Bank of China acted as Lead Underwriter and Lead Bookrunner for this inaugural transaction and led final allocations, taking 67% of the final book. Panda Bonds were the focus of the agreement signed between CDP and the Bank of China in March 2019 during the Italy-China Business Forum. According to the agreement, signed by CEO Fabrizio Palermo and Chen Siqing, Chairman of the Bank of China, CDP will work on a series of 5 billion Renminbi issues to support branches or subsidiaries of Italian companies with offices in China and develop a co-financing programme with Italian and Chinese banks for Italian companies in China.
• CDP is the Italian National Promotional Institution, controlled by the Italian Ministry of Economy and Finance.
Key Terms ALLOCATION BY BOOKRUNNERS
Issuer Cassa depositi e prestiti S.p.A. Coupon 4.50%
Programme RMB 5 billion Spread CDB+ 140 bps Size Bank of China 33% Size RMB 1 billion Law PRC Law Other 3 Syndicate 67% Members Ranking Senior Unsecured Clearing SCH
Ratings Baa3(M)/ BBB (S&P)/ BBB (Fitch)/ AAA (CCXI) Maturity 01/08/2022
Pricing Date 31/07/2019 Tenor 3Y
45 Lead Underwriter and Lead Bookrunner - BMW Finance N.V. 2019 Renminbi Bonds (Series 2) RMB 1.5 billion 1-year (Tranche 1) & 2 billion 3-year (Tranche 2) (Bond Connect)
• BMW Finance N.V. successfully issued a dual-tranche RMB 3.5 billion Panda bond in China’s onshore Market ALLOCATION BY BOOKRUNNERS on 10 July 2019. The private placement offering included a 1 year RMB 1.5 billon tranche (Tranche 1) and a 3 year RMB 2 billion tranche (Tranche 2). It was the first dual-tranche structure issued under BMW Finance N.V.’s Renminbi bonds issuance programme.
• The offering was the 2nd series bond under BMW‘s RMB 20 billion CIBM programme registered in 2019, after the inaugural 3 year RMB 3 billion 4.00% issue in March 2019. BWM has mandated Bank of China 47% 53% Limited as the lead underwriter, along side four financial advisors. This issuance benefitted from strong syndicate group support and widespread demand across offshore and onshore investors, including eligible investors through Bond Connect.
• BMW Finance N.V. successfully priced through the secondary curve and auto sector comparables and Bank of China Other 4 Syndicate Members achieved levels within the pricing guidance of 3.30-3.90% for the Tranche 1 Bonds, and 3.70-4.30% for the Tranche 2 Bonds, despite onshore rates volatility during the execution. Tranche 1 bonds (1Y) achieved a 2.83x oversubscribed rate and were priced at 3.30%, which meant only 18 bps spread versus the AAA corporate credit curve and at the lower limit of the pricing range. The 3-year Tranche 2 bonds attracted follow up demand from investors, which participated in the March drawdown. With a 1.75x oversubscribed rate, the final price was at 3.98%, about a 40 bps spread over AAA corporate credit curve, which was close to the mid-point of the expected range.
• Bank of China is the leading bank in Corporate Panda Bond issuance pioneering deals for Daimler, BMW, Veolia, Trafigura. Key Terms
Issuer BMW Finance NV Coupon 3.30% (1Y) / 3.98% (3Y) Guarantor BMW AG Spread AAA+18 (1Y) / AAA+40 (3Y) Size RMB 1.5 bn (1Y) / RMB 2 bn (3Y) Law PRC Law Ranking Senior Unsecured Listing SCH Ratings A1 (Moody/s) / A+ (S&P) / AAA (CCXI) Maturity 12/07/2020; 12/07/2022
Pricing Date 10 Jul 2019 Tenor 1Y / 3Y 46 Global Coordinator - The People’s Republic of China RMB 1.7 billion 3-year Lotus Bond - First Lotus Bond issued in Macau
• On July 3 2019, Bank of China led the first Lotus Bond Transaction for the People’s Republic of China, acting INVESTOR BY TYPE as the sole Global Coordinator. 1%
• The three year bond include a RMB 1.7 billion portion for institutional investors and a RMB 300 million 9% 4% portion for retail investors which would be open to individual subscribers from July 5 to July 19.
• There have been strong interests fro investors in the mainland and Macau, as well as offshore investors. Offshore investors could participate through their custodian banks in Macau or their registered accounts at 86% the Monetary Authority of Macau. The final book was more 3x over subscribed (over RMB 5.4 billion).
• According to MOF, the issuance would help other issuers to follow in its footsteps and sell renminbi bonds in Macau, as well as providing a low-risk investment option for investors. PF CB Banks Ins/Others
Key Terms INVESTOR BY REGION
Issuer China MOF Coupon 3.05% 5% Size RMB 1.7 billion Law Macau Ranking Senior Unsecured, Listing Chongwa (Macao) Financial Asset Exchange 28.5% Ratings A1/A+/A+ (Moody’s/S&P/Fitch) Maturity 11 Jul 2022 67.0% Pricing Date 04 Jul 2019 Tenor 3Y
Macau HK Other 47 Lead Underwriter and Lead Bookrunner – Republic of Portugal RMB 2 billion 3-year Panda - First Eurozone Nation to issue Panda bonds
• On May 30 2019, Bank of China led the first Panda Bond Transaction for the Republic of Portugal, acting as the ALLOCATION BY SYNDICATE Lead Bookrunner and Joint Lead Underwriter. The transaction is the first Panda Bond from a Eurozone sovereign and the third from a European sovereign after Poland and Hungary’s previous RMB transactions.
• This offering was issued under Portugal’s RMB 5 billion CIBM programme and the first tranche was RMB 2 46% billion. This offering is also the second sovereign Panda deal executed this year after the Republic of the Philippines. In order to introduce its story, Portugal embarked on a comprehensive non-deal roadshow in 54% Beijing, Shanghai and Singapore.
• This issuance priced at 4.09%, which translated into a 74 basis points spread over the China Development Bank benchmark. The marketing of the transaction commenced at the range of 3.90% to 4.50% earlier this week. Despite market volatility during the execution week, Portugal managed to price the transaction closer to the Bank of China Other 4 Syndicate members lower end of the pricing range due to strong demand with the final order book more than three times oversubscribed (3.165x cover ratio).
• The bonds, rated AAA by China Lianhe Credit Rating, were also available to certain offshore institutional investors via Bond Connect, which played an important part in the transaction with close to 50% of demand. Key Terms INVESTOR BY REGION
Issuer Portugal Coupon 4.09% Size RMB 2 billion (RMB 5 bln Programme) Spread CDB+74 bps Ranking Senior Unsecured Law PRC 48.5% 51.5% Ratings Baa3/BBB/BBB(Moody’s/S&P/Fitch) Clearing SCH/Hong Kong Selling Restrictions Ratings AAA (Lianhe) Maturity 03 Jun 2022 Pricing Date 30 May 2019 Tenor 3Y
Chinese Mainland Offshore 48 Lead Underwriter and Lead Bookrunner - Trafigura Group PPN RMB 540 million 3-year Panda
• Bank of China, acting as the lead bookrunner, successfully arranged for the fourth Panda bond transaction for ALLOCATION BY BOOKRUNNERS Trafigura Group.
• Trafigura Group is the first issuer with no international rating tapping the Panda Bond Market, but the issuer obtained an onshore scale rating of AAA.
56% 44% • This fourth transaction of RMB 540 million was placed in the interbank market as a private placement for a 3- year maturity on 28 May 2019.
• Trafigura, one of the world’s biggest traders of oil and metals, decided to widen its funding sources beyond bank loans and credit facilities, and planted the flag in this fast growing debt market with an intension to become a regular issuer. Bank of China Other Banks
Key Terms
Issuer Trafigura Group PTE LTD Law PRC Ratings AAA (LIANHE) Clearing SCH INVESTOR BY REGION
Size RMB 500 million Coupon 6.50% Size RMB 500 million Coupon 6.50% Ranking Senior Unsecured Maturity 27 Apr 2021 Ranking Senior Unsecured Maturity 24 May 2021 Issue Date 27 Apr 2018 Tenor 3Y Issue Date 22 May 2018 Tenor 3Y
Size RMB 700 million Coupon 6.20% Size RMB 540 million Coupon 5.49%
Ranking Senior Unsecured Maturity 28 Sep 2021 Ranking Senior Unsecured Maturity 20 May 2022 100% Issue Date 28 Sep 2018 Tenor 3Y Issue Date 20 May 2019 Tenor 3Y
Chinese Mainland 49 Sole Lead Underwriter and Bookrunner - The Republic of the Philippines RMB 2.5bn 3-Year Panda Bonds
• Bank of China acting as the Sole Lead Underwriter and Bookrunner helped the Republic of the Philippines ALLOCATION BY BOOKRUNNERS (“ROP”) to tap the China Interbank Bond Market with a new Panda Bond on 15 May 2019. ROP priced CNY 2.5 billion 3-year Panda offering at 3.58%. China domestic credit rating of the ROP and the Panda bonds are both 20% AAA, which are given by China’s Lianhe Credit Rating Co. Ltd. The current international rating of the ROP is Baa2/BBB+/BBB (Moody’s/S&P/Fitch)..
• The 2022 Panda bond coupon of 3.58% includes a 32 basis points spread over China Development Bank benchmark, which is tighter than the last year spread for a similar tenor of 35 bps.
• The final landing point of ROP Panda issue set at 3.58%, close the lower end of the pricing range of 3.50-4.10%. 80% The order book was 4.57x oversubscribed, reflecting a wider following for ROP credit. In terms of geographical breakdown of investors, we leveraged the Bond Connect scheme, placing 57.6% to overseas investors, while Bank of China Other Banks 42.4% of final allocation went onshore investors. Major investors included commercial banks and asset management companies from China onshore and offshore markets.
• Bank of China led the syndicate allocation with 80% of order book and this transaction represents the second Panda Bond we successfully executed for ROP. Key Terms INVESTOR BY REGION
Issuer The Republic of the Philippines Coupon 3.58% 7% Size RMB 2.5 billion (RMB 6 bln Programme) Spread CDB+32 bps Ranking Senior Unsecured Law PRC Ratings Baa2/BBB+/BBB(Moody’s/S&P/Fitch) Clearing SCH 42% Ratings AAA (Lianhe) Maturity 20 May 2022 50% Pricing Date 15 May 2019 Tenor 3Y
Chinese Mainland Hong Kong SAR Others 50 Lead Underwriter and Lead Bookrunner - United Overseas Bank Limited RMB 2 billion 3-year Panda - First Panda Bond issued by Singapore Issuers
• As the Lead Underwriter and Lead Bookrunner, Bank of China helped United Overseas Bank Limited issue its ALLOCATION BY BOOKRUNNERS inaugural Panda bond in China interbank bond market on 12 Mar 2019. The CNY 2.0 billion 3-year Panda offering was priced at 3.49%, marking the financial Panda bonds of the second lowest coupon ever since, and also one of the lowest coupons in the Panda bond space.
• This issuance is the first Panda bond from Singapore, the second issuance in banking industry from SEA 56% (Maybank), and the third issuance from SEA (Republic of Philippines). It is also the first Panda bond issued by 44% financial institutions since the announcement of the “Interim Measures for the Administration of Bond issuance by Overseas Entities in China Interbank Bond Market” by People’s Bank of China and China Ministry of Finance last September.
• The final landing point was set at 3.49%, representing a spread of 31bps over China Development Bond yield of Bank of China Other Banks the same tenor on the pricing day, despite the volatile bond market due to recent risk-on sentiment. And the order book is 2.7 times oversubscribed, reflecting wider recognition of UOB’s strong credit.
• In terms of geographical breakdown of investors, 62% of final allocation went to offshore investors. Major investors include commercial banks from China onshore and offshore markets. Key Terms INVESTOR BY REGION
Issuer United Overseas Bank Limited Coupon 3.49% Size RMB 2 billion Spread CDB+31 bps Ranking Senior Unsecured Law PRC 38% Ratings Aa1/AA-/AA-(Moody’s/S&P/Fitch) Clearing SCH 62% Ratings AAA (CCXI) Maturity 14 Mar 2022 Pricing Date 12 Mar 2019 Tenor 3Y
China Onshore Offshore 51 Lead Underwriter and Lead Bookrunner – BMW Panda Bond PPN Guaranteed Structure RMB 3 billion 3-year Panda
• BMW successfully issued RMB 3 billion Panda bonds in China’s onshore Market on 6 March 2019. This deal ALLOCATION BY BOOKRUNNERS represented the first EMEA corporate deal issued under the new Panda Bond Guidelines released by PBOC last September. It is the first automotive deal issued through a guaranteed structure.
• The offering was the first tranche under BMW’s RMB 20 billion CIBM programme registered in 2019. The deal benefited from strong onshore and offshore demand and support from the banking group lead by Bank of 59% 41% China. BMW is the second Panda bond issuer from the automotive sector following Daimler’s regular issuances since 2014, both programmes are led by Bank of China as the Lead Bookrunner.
• The bond, which was awarded a domestic rating of AAA by CCXI, attracted a broad group of investors with the order book 1.25x oversubscribed.
Bank of China Other 4 Syndicate Members • BMW successfully priced through the comparables and managed to price within the pricing guidance of 3.60- 4.20% despite onshore rates volatility during the week of pricing. The final deal priced at 4.00% with a minimal 34 bps new issue premium over the AAA corporate credit curve.
Key Terms INVESTOR BY REGION
Issuer BMW Finance NV Coupon 4.00% Guarantor BMW AG Spread AAA+34 bps Size RMB 3 billion Law PRC 40% Ranking Senior Unsecured Clearing SCH
Ratings A1 (Moody’s) / A+ (S&P) / AAA (CCXI) Maturity 06 Mar 2022 60% Pricing Date 06 Mar 2019 Tenor 3Y
China Onshore Offshore 52 Joint Underwriter - New Development Bank Panda Bond (Bond Connect) RMB 3 billion 3-year / 5-year Panda
• On February 26, New Development Bank issued the Panda Bond (bond connect) successfully in the China interbank market, with size of 3 billion RMB. The bond consist of two tranches: tranche 1 with the basic issue size of 2 billion RMB, and the tenor is 3 years; tranche 2 with the basic issue size of 1 billion RMB, and the tenor is 5 years.
• The nominal interest rate for tranche 1 is 3.00% and the final order book of the offering was 3.57 times oversubscribed; the nominal interest rate for tranche 2 is 3.32% and the final order book of the offering was 3 times oversubscribed;
• This deal has set a good benchmark for international development institution to raise Panda bond (bond connect) in the CNY market.
• This is the first IDI Panda bond (bond connect) which gained strong market recognition after NAFMII issues Guidelines on Debt Financing Instruments of Overseas Non-Financial Enterprises(for Trial Implementation).
Key Terms
Issuer New Development Bank Coupon 3.00% / 3.32% Size RMB 2 billion / 1 billion Interest basis Fixed rate Ranking Senior Unsecured Law PRC Ratings AA+ (S&P) / AA+ (Fitch) Clearing SCH Ratings AAA (LIANHE) / AAA (CCXI) Maturity 26 Feb 2022 / 26 Feb 2024 Issue Date 26 Feb 2019 Tenor 3Y / 5Y
53
DCM Teams
54 DCM Teams
Bank of China Head Office Bank of China DCM Centre (EMEA)
General Manager Head Tel: +44 (0) 207 282 8927 Mr Kun Hu Jaswinder Investment Banking & Asset Management Department Debt Capital Markets Centre (EMEA) E-mail: Sandher Bank of China HO Bank of China London [email protected]
Joint Head Tel: +44 (0) 203 192 5817 Head of DCM Tel: +86 (0) 10 6659 4078 Na Wang Debt Capital Markets Centre (EMEA) Investment Banking & Asset Bank of China London E-mail: [email protected] Mr Yanjie Li E-mail: Management Department [email protected] Bank of China HO china.com Head of Origination (WEA) Tel: +44 (0) 203 192 8400 Tim Skeet Debt Capital Markets Centre (EMEA) Senior Manager of DCM E-mail: [email protected] Tel: +86 (0) 10 6659 4078 Bank of China London Investment Banking & Asset Mr Bo Su Management Department E-mail: [email protected] Head of Origination (CEEME) Tel: +44 (0) 203 192 8298 Bank of China HO Viktoria Debt Capital Markets Centre (EMEA) E-mail: Beromelidze DCM Manager Bank of China London [email protected] Investment Banking & Asset E-mail: Shangqian Li Management Department [email protected] DCM Manager Tel: +44 (0) 207 282 8886 Bank of China HO Jacko Wang Debt Capital Markets Centre (EMEA) Bank of China London E-mail: [email protected] DCM Manager Tel: +86 (0) 10 6659 2416 Investment Banking & Asset Head of EMEA Syndicate Mr Ricky Liu Tel: +44 (0) 203 192 8300 Management Department E-mail: Kenneth Madill Debt Capital Markets Centre (EMEA) E-mail: [email protected] Bank of China HO [email protected] Bank of China London EMEA Syndicate Head of Syndicate Tel: +86 (0) 10 6659 5042 Tel: +44 (0) 203 192 8298 Qiuzi Zhao Debt Capital Markets Centre (EMEA) Mr Lianhui Investment Banking & Asset E-mail: Bank of China London E-mail: [email protected] Zhou Management Department [email protected] Bank of China HO -of-china.com Head of Transaction Management Tel: +44 (0) 203 192 8383 Gareth Spero Debt Capital Markets Centre (EMEA) E-mail: [email protected] Syndicate Tel: +86 (0) 10 6659 5090 Bank of China London Investment Banking & Asset E-mail: Mr Ji Xia Roadshow Coordinator Management Department [email protected] Tel: +44 (0) 207 282 8882 Yiding Li Debt Capital Markets Centre (EMEA) Bank of China HO china.com Bank of China London E-mail: [email protected]
55 Green Bond Developments
56 EU Green Bond Standard
The EU Commission’s Action Plan on financing sustainable growth calls for the creation of standards and labels for green financial products.
Recommendation
Proposed definition of an EU Green Bond:
The TEG recommends that an EU Green Bond could be any type of listed or unlisted bond or capital market debt instrument issued by a European or international issuer that is aligned with the EU Green Bond Standard.
Source: BOC, EU TEG Reports, TEG Recommendations https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en 57 EU Green Bond Standard vs. ICMA Green Bond Principles 2018
EU Green Bond Standard ICMA Green Bond Principles 2018 (GBP18) Key Components Key Components
Use of Proceeds Alignment with EU-taxonomy Use of Proceeds for Green Projects
Publication of a Green Bond Framework which confirms the voluntary alignment of green bonds issued with the EU GBS, Process for Project Evaluation and Selection explains how the issuer’s strategy aligns with the environmental objectives, and Clear Communication to Investors provides details on all key aspects of the proposed use-of-proceeds, processes and Green Bond Framework Recommended (Structure is similar to EU TEG Guidelines) reporting of the green bonds
Management of Proceeds Mandatory reporting on use of proceeds (allocation report) and on environmental Transparency Recommended impact (impact report).
Reporting Mandatory verification of the Green Bond Framework and of the allocation report by Volunteer Reporting an external reviewer. External Verification is recommended
Source: BOC, EU TEG Reports, ICMA TEG Recommendations https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en 58 EU Green Bond Standard vs. ICMA Green Bond Principles 2018
EU Green Bond Standard ICMA Green Bond Principles 2018 (GBP18)
Volunteer non-legislative
EU Green Bond Guidelines on the use of proceeds are more specific if Guidelines Nature Volunteer compared to ICMA GBP18 due to the suggested EU Taxonomy and increased reporting transparency
Use of Proceeds in legal documentation Required in the Legal Documentation (to be included in the Final terms) Recommended
Alignment with EU-taxonomy: Proceeds from EU Green Bonds should go to finance or refinance projects/activities that (a) contribute All designated Green Projects should provide clear environmental substantially to at least one of the six taxonomy Environmental benefits, which will be assessed and, where feasible, quantified by the Objectives, (b) do not significantly harm any of the other objectives and issuer. (c) comply with the minimum social safeguards. Where technical
screening criteria have been developed, financed projects or activities Use of Proceeds Eligible Green Project: Renewable energy, energy efficiency, pollution shall meet these criteria, allowing however for specific cases where Alignment prevention and control, environmentally sustainable management of these may not be directly applicable. living natural resources and land use, terrestrial and aquatic
biodiversity conservation. clean transportation, sustainable water and Environmental Objectives: (i) climate change mitigation, (ii) climate wastewater management, climate change adaptation , eco-efficient change adaptation, (iii) sustainable use and protection of water and and/or circular economy adapted products, production technologies marine resources, (iv) transition to a circular economy, waste and processes, green buildings prevention and recycling; (v) pollution prevention and control and (vi) protection of healthy ecosystems. Disclosure of proportion of Required Recommended proceeds used for refinancing Impact monitoring and reporting Required Recommended
Source: BOC, EU TEG Reports, ICMA TEG Recommendations https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en59
The EU Taxonomy Recommendations
Investors Issuers
• To be included in the proposed EU Taxonomy, an economic activity must • Issuers are encouraged to provide Taxonomy related data to investors via contribute substantially to at least one environmental objective and do no the revised guidelines accompanying the Non-Financial Reporting significant harm to the other five, as well as meet minimum social Directive. safeguards. Technical screening criteria set requirements for determining Substantial Contribution and Doing No Significant Harm (DNSH). • The guidelines recommends that companies provide their revenues or turnover broken down according to the taxonomy’s classification as well as • Under the proposed Taxonomy regulation, EU institutional investors and how they meet DNSH criteria and their capital expenditure in taxonomy- asset managers marketing investment products as environmentally eligible activities. sustainable would need to explain whether, and how, they have used the Taxonomy criteria. Investors could state that they are seeking to invest in • Issuers and projects whose activities meet the taxonomy criteria can Taxonomy-eligible activities or disclose their own preferred approach to benefit from being eligible for both environmentally oriented equity and determine that their investment is environmentally sustainable. debt funds. That is also the case for those companies and projects that develop technologies and products that are critical for other sector • This will encourage issuer to use taxonomy language in the green use of companies to meet environmental objectives. proceeds to help investor community. • Issuers or projects that work towards meeting the Taxonomy criteria The six Taxonomy environmental objectives: over time can raise capital to finance the greening of their activities e.g. to lower the carbon intensity by issuing use-of-proceeds bonds or loans. I. climate change mitigation; II. climate change adaptation; III. sustainable use and protection of water and marine resources; IV. transition to a circular economy, waste prevention and recycling; V. pollution prevention and control; VI. protection of healthy ecosystems.
Source: TEG Recommendations https://ec.europa.eu/info/publications/sustainable-finance-technical-expert-group_en 60