The Hong Kong branch of Bank of China on January 7 priced transition bonds totalling US$778.20 million equivalent to support China’s decarbonization towards achieving carbon neutrality by 2060 and further drive the realization of the goals of the Paris Agreement.
The Reg S deal consisted of US$500 million bond for three years, which was priced at 99.829% with a coupon of 0.875% to offer a yield of 0.933%. This was equivalent to a spread of 72bp over the US treasuries, which was in line with the final price guidance and 38bp tighter than the initial guidance of 110bp area.
The other tranche was for CNH1.8 billion (US$278.20 million) for two years, which was priced at par with a similar coupon and re-offer yield of 2.80%. This was also in line with the final price guidance and 50bp inside the initial range of 3.30% area
The transaction was the first transition bond linked to the new transition finance handbook by the International Capital Market Association. “This debut transaction is another welcome evolution of ESG financing markets, and a demonstration of Asia’s pioneering role in transforming the financial system to support the transition to a low-carbon economy,” says David Liao, head of global banking for Asia-Pacific at HSBC, which acted as a joint global coordinator, bookrunner and lead manager for the deal.
“Transition bonds recognize and facilitate the need for smart, ambitious low-carbon pathways among traditionally higher-carbon businesses, which are committed to meeting the climate challenge,” he adds.
The US dollar tranche attracted an order book of US$1.76 billion from 68 accounts with 64% of the paper allocated in Asia and 36% in EMEA. By type of investors, banks accounted for 48%, central banks and official institutions 31%, and fund managers, insurance companies and other investors 21%. The CNH tranche, on the other hand, garnered orders worth CNH9.8 billion from 89 accounts with 94% of the bonds distributed in Asia and 6% in Europe. By type of investors, the biggest buyers were the ALMs (asset liability management) with 47%, followed by asset management 36%, private banks 14%, and hedge funds and other investors 3%.
The bonds are drawn under BoC’s US$40 billion medium-term note programme. Apart from HSBC, Bank of China, Credit Agricole CIB and BNP Paribas were the other joint global coordinators for the CNH tranche, as well as joint bookrunners and lead managers along with Agricultural Bank of China (Hong Kong), China Minsheng Banking Corporation (Hong Kong), CTBC Bank, DBS and Standard Chartered.
Bank of China, BNP Paribas, Credit Agricole CIB and HSBC were also the joint global coordinators for the US dollar tranche, as well as joint bookrunners and lead managers along with BofA Securities, China International Capital Corporation, Citi, ICBC (Asia) and Mizuho Securities.