ICBC (Asia) 1.5 billion renminbi Basel III-compliant tier 2 notes

Joint global coordinators: HSBC, ICBC International

Joint bookrunners: Bank of China, Credit Suisse, DBS Bank, Goldman Sachs, HSBC, ICBC International

Industrial & Commercial Bank of China (Asia) on October 27 launched the first subordinated bank capital instrument to be placed in the CNH market amounting to 1.5 billion renminbi, representing the first ever Basel III-compliant securities to be priced in Asia.

The ten-year non-call five bonds were priced at par with a coupon of 6%.

It was the first subordinated bank capital instrument from an Asian issuer to incorporate contractual loss absorption in line with Basel non-viability loss absorption requirements.

This clause means that the value of the bonds will be written off to zero if the bank is declared non-viable by the Hong Kong Monetary Authority (HKMA) or if the bank would need an injection of public funds to rescue it.

Before the transaction, ICBC (Asia) worked extensively with the HKMA to properly structure the capital notes to be fully Basel III compliant.

The remoteness of a non-viability event and the recognition of the strong ownership structure between ICBC (Asia) and its parent ICBC made the investors comfortable with the non-viability clause.

The transaction was well-oversubscribed with an order book in excess of 5 billion renminbi from over 80 accounts.

The paper was distributed to private banks (54%) and institutional accounts (insurance companies 20%, fund managers 18% and others 8%).