The Industrial and Commercial Bank of China (ICBC) on September 16 priced a US$6.16 billion Basel III-compliant undated additional tier-1 (AT1) capital bonds, representing the first capital offering from China this year and the largest single-ranche issuance from Asia in the past four years.
The Reg S undated non-call five-year deal was priced at par with a similar coupon and re-offer yield of 3.20%. This was in line with the final price guidance and 45bp tighter than the initial price range of 3.65% area. This is the lowest ever AT1 yield out of Greater China and the lowest-ever yield globally for an AT1 in the same rating range. “It highlights investors continue to differentiate ICBC in the market even where other sectors may be experiencing a more challenging environment,” says Adrian Khoo, co-head of debt capital markets in Asia at Citi, one of the deal arrangers.
In executing the transaction, ICBC conducted a series of fixed-income investor conference calls commencing on September 14 2021, in which it generated a strong indication of interests. The order book built strongly throughout the day when the deal was launched, peaking at US$9.2 billion – one of the largest order books for any Asian financial institution, with demand coming from high quality mix of asset managers, corporates, insurance companies and quasi-sovereign accounts.
Under the deal structure, the bonds will be permanently written off – in whole or in part – upon a non-viability trigger event. This will occur when the China Banking and Insurance Regulatory Commission determined that ICBC will not be able to exist if there is no conversion or write-off of the bank’s capital or the relevant regulatory departments determined that public-sector capital injection or equivalent support is needed, without which ICBC would not become viable.
ICBC (Asia) is the sole financial adviser for the transaction as well as a joint global coordinator, bookrunner and lead manager, along with Citi, HSBC, J.P. Morgan and Mizuho Securities. BOC International, Credit Agricole CIB, Commerzbank, ICBC Standard Bank, Natixis and UBS are the joint bookrunners and lead managers.