Baosteel, a Chinese SOE (state owned enterprise) steelmaker, became the first mainland company to tap the dim sum market directly when it closed a RMB 3.6 billion ($564 million USD) offshore Renminbi bond ,which is the largest corporate dim sum issue to date.
Baosteel is the largest of the three Chinese steel producers under the supervision of the State-owned Assets Supervision and Administration Commission of the State Council and was the first PRC-incorporated company to win approval from the National Development & Reform Commission to issue an offshore Renminbi bond directly in Hong Kong .
Chinese companies and financial institutions have an overall quota of RMB 50 billion for direct issuance in the dim sum bond market this year, Baosteel is the first to issue under this quota.
The RMB1 billion two-year bond priced at a yield of 3.125%, the RMB 2.1 billion three-year at 3.50% and the RMB 500 million five-year bond at 4.375%. All the tranches priced at the tight end of guidance, which was at 3.125% to 3.375% for the two-year, 3.5% to 3.75% for the three-year and 4.375% to 4.625% for the five-year. The notes were issued at par.
The two-year bonds mature on December 1, 2013 , the three-year bonds on December 1, 2014 and the five-year bonds on December 1, 2016 .
Deutsche Bank and HSBC were joint global coordinators and book runners. China Merchant Securities, DBS, ICBC International and Standard Chartered were also book runners.
HSBC was ratings adviser to Baosteel and the issue was rated A3/A/A- by Moody’s/S&P/Fitch. The current rating from S&P is better compared to 2009, when it’s A-/negative rating was withdrawn.
Another factor that makes the RMB Bonds attractive to American investors is the idea that the RMB might appreciate against the US Dollar, making this not only a bond purchase but also a currency play, but what if the RMB doesn’t appreciate? We are seeing a slow down in the economy here in China Washington D.C.
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