the company is now worth
US$4.1bn.
Around 30% of the IPO,
or 33.9m shares, has been
allocated to strategic investors.
Sponsor Citic Securities will buy
3% of the float or 3.4m shares
as a strategic investor, and
four other strategic investors,
including a subsidiary of Intel
in Dalian city, will buy 30.5m
shares. The remaining 70%
of the IPO will be bought by
institutional (80%) and retail
(20%) investors.
Citic Securities was one
of the investors in a private
financing round in May 2018.
It owns a 5.65% stake in the
company.
Montage will use the
proceeds for research in
artificial intelligence and
new-generation chips and to
upgrade its hardware.
Citic Securities is also joint
bookrunner with CICC, China
Securities, Guotai Junan Securities,
and Zhongtai Securities.
The sponsor and bookrunner
fee for the deal will be 1.25%
of the fundraising size, and
each bookrunner will get not
less than Rmb1.8m as a service
fee.
BOC scales back offshore AT
Bonds Chinese banks seek cheaper capital in onshore marketBY CAROL CHAN, DANIEL STANTONBANK OF CHINA, whose US$6.5bn
Additional Tier 1 offering set a
record for Chinese bank capital
issuance in 2014, will refinance
less than half of those securities
in the offshore market later
this year as onshore funding
has become more attractive.
The Hong Kong and
Shanghai-listed lender said
on July 2 it received approval
from the China Banking
and Insurance Regulatory
Commission to issue up
to Rmb20bn (US$2.9bn) of
offshore preference shares. This
suggests that only part of the
6.75% preference shares, which
have a first call date in October
this year, will be refinanced in
the international market.
The offshore quota is half
what BOC had flagged earlier.
In January, the bank won
shareholder approval to issue
up to Rmb120bn of preference
shares in the onshore and
offshore markets, with up to
Rmb40bn to be raised offshore.
With onshore funding costs
now far lower than offshore,
Chinese lenders are favouring
the onshore market for
regulatory capital issuance.
China this year made it easier
for banks to issue AT1 capital in
the onshore market, allowing
perpetual bonds for the first
time and making the securities
eligible for repo transactions
with the central bank. Under
previous rules, only preference
shares counted as AT1 capital,
putting the format off limits to
unlisted banks.
BOC in late January issued
the country’s first onshore
bank perpetual bond, raising
Rmb40bn at 4.50%. China
Minsheng Banking Corp in May
and Hua Xia Bank in June also
issued onshore perpetual notes
of Rmb40bn each, both at a
yield of 4.85%.
The funding cost was much
lower than what the two banks
would have paid offshore. Forexample, Minsheng’s 4.95%
offshore preference shares
issued in 2016 were trading at a
yield of 6.1%-6.2% last week.
BOC was the first Chinese
bank to issue offshore AT1 five
years ago, and how it deals
with the call option is seen as a
model for others.
All subsequent Chinese bank
offshore AT1s are callable
after five years and have loss-
absorption features that could
see them converted into equity
in the worst-case scenario.OFFSHORE APPEAL?
There was little bank capital
issuance in the offshore market
in the first half, but that is
expected to increase towards
the end of the year as some
banks either issue debut AT
bonds or refinance callable
securities.
So far this year, China
Construction Bank was the only
PRC-incorporated bank to sell
Tier 2 bonds in the offshore
market with a US$1.85bn
10-year non-call five issue in
February. Guangzhou Rural
Commercial Bank was the only
one to issue offshore AT1s – a
tightly priced US$1.43bn debut
at 5.90% in June.
“Yield products like AT1s and
corporate hybrids are going to
be in vogue in a world where
the 10-year US Treasury yield
is around 2%,” said Ed Tsui,
head of Asia debt syndicate at
Deutsche Bank. “Most Chinese
AT1s were sold onshore earlier
this year, but with the buoyant
offshore market I think
discussions will be refreshed.”
But so far, based on capital
issuance plans announced by
Chinese banks, the onshore
market is likely to account for a
large share of the supply.
BOC has received approval
from both the CBIRC and the
China Securities RegulatoryCommission to issue up
to Rmb100bn of onshore
preference shares.
Moreover, it also plans
to issue up to Rmb40bn of
perpetual capital bonds and up
to Rmb70bn of Tier 2 bonds
onshore and offshore. The
onshore/offshore split was not
specified.
INDUSTRIAL AND COMMERCIAL BANK
OF CHINA’s US$5.7bn-equivalent
triple-currency offshore AT1s
will be callable in December
this year, but it looks like that
ICBC will only refinance part
of them in the international
market.
ICBC last November won
shareholder approval to issue
preference shares in both
onshore and offshore markets
to raise up to Rmb100bn, with
no more than Rmb44bn to
come offshore.
Earlier this year, ICBC
received approval from both
the CBIRC and the CSRC
to issue up to Rmb70bn of
onshore preference shares.
So far no approval has been
received for its offshore AT
issuance plan.
In May it received shareholder
approval to issue up to
Rmb80bn perpetual securities in
the onshore market.
Meanwhile BANK OF
COMMUNICATIONS and CHINA
CONSTRUCTION BANK have calls
next year on US$2.45bn and
US$3.05bn of offshore AT1s,
respectively. Smaller joint
stock commercial banks,
city commercial and rural
commercial banks have call
dates on their offshore AT1s
mostly coming in late 2021 and
in 2022.
CCB in June received
shareholder approval to issue
up to Rmb40bn of onshore
perpetuals and up to Rmb80bn
of Tier 2 bonds in the onshore
and offshore markets. For daily news stories
visit http://www.ifrasia.comproject,” said an IMF report in
May.
The completion of key
projects, including the railway
and a hydropower plant, will
bring in much-needed revenues
from dividends and royalty fees.
Laos has also restructured
a number of public agencies,
such as consolidating the
finance ministry’s external and
domestic functions under the
2018 Public Debt Management
Law. The collection of taxes,
such as car taxes and land
taxes, is also being moved to
an electronic system which has
plugged major leakages.
Laos is looking to raise funds
to refinance Bt6.6bn of bonds
that are due to mature in
October and November. It was
the only foreign issuer to obtain
Thai government approval to
sell baht-denominated bonds
between May 1 2019 and
January 31 2020.
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