Bank of China (BoC) became the first issuer in Asia to launch a blue bond as it priced, on September 14, a dual currency offering totalling US$942.50 million equivalent aimed at financing marine-related green projects.
The Reg S deal comprised a three-year US$500 million bond, which was priced at 99.694% with a coupon of 0.950% to offer a yield of 1.054%. This was equivalent to a spread of 90 basis points (bp) over the US treasuries, or at the tight end of the final price guidance of between 90bp and 93bp, and 40bp inside the initial price range of the 130bp area.
The other tranche was a two-year CNH 3 billion (US$442.50 million) bond, which was priced at par with a similar coupon and re-offer yield of 3.15%. This was in line with the final price guidance, and 35bp tighter than the initial price range of 3.50% area. Both US dollar and CNH tranches were drawn under BoC’s US$40 billion medium-term note programme.
The CNH tranche, which was issued through BoC’s Macau branch, attracted an orderbook of CNH 4.5 billion from 58 accounts, with 96% of the paper distributed in Asia, 3% in offshore US, and 1% in Europe. By type of investors, banks and other financial institutions accounted for 46% of the bond, asset managers 27%, private banks 19%, and insurance companies and other investors 8%. The US dollar tranche was issued through BoC’s Paris branch.
BoC has established a mechanism to manage and ensure that the net proceeds of the blue bond will be used to fund eligible green projects. Due to its global network, the bank will allocate the proceeds to projects across various domestic and overseas markets.
The eligible projects selected must meet the requirements of a sustainable blue economy. A sustainable blue economy is described as a marine-based economy seeking to promote economic growth and preserve marine ecological environment, while ensuring the sustainable use of marine resources.
In order to facilitate the restoration of marine ecological environment, the efficient use of resources and the development of marine industry, the categories of eligible projects endorsed under BoC’s 2020 blue bond include renewable energy, such as offshore wind power projects, which promote the development of marine renewable energy, and sustainable water and wastewater management. The latter includes marine-related integrated sewage treatment projects in coastal cities, which reduce the discharge of untreated sewage to the seas and coastal areas.
BoC has appointed Ernst & Young Hua Ming to provide the attestation report and environmental impact review for as long as the blue bond remains outstanding.
BoC, Credit Agricole CIB, BNP Paribas, Agricultural Bank of China (Hong Kong), Citi, DBS, KGI Asia, Mizuho Securities and Scotiabank were the joint global co-ordinators, bookrunners and lead managers for the CNH tranche. For the US dollar tranche, BoC, Credit Agricole, BNP Paribas, Natixis and Societe Generale acted as joint global co-ordinators, as well as joint bookrunners and lead managers, along with CCB International and China International Capital Corporation.