Bank of China Plans Record $5 Billion Tier 1 Bond SaleChristopher Langner
Bank of China Ltd. plans to sell as much as $5 billion equivalent of subordinated bonds that will qualify as Tier 1 as it bolsters its capital base, in what would be the biggest such issuance from the country.
China’s fourth-biggest lender sent out requests for proposals and met with 18 banks last week in the process to select underwriters, according to four people familiar with the matter who asked not to be identified because the information is confidential. The sale would be the largest of Tier 1 notes from China, after China Citic Bank International Ltd. issued $300 million of the securities in April, according to data compiled by Bloomberg.
Bank of China plans to issue the bonds in various currencies, which may include the Chinese yuan and the U.S. dollar, the people said yesterday. The lender is targeting a 6 percent to 7 percent coupon, according to the people. Similar meetings with 16 banks earlier this year conclude without any decision as to which would lead the transaction, they said.
The Beijing-based lender reported earlier this week that it had more than doubled the amount it set aside for bad loans as profit growth cooled to the slowest pace in five quarters amid a slump in economic expansion. Its capital adequacy ratio, a measure of financial strength, was 11.8 percent, down from 12.5 percent in December. Its Tier 1 buffer was 9.37 percent.
Under China’s banking rules, systemically important banks need a minimum Tier 1 capital ratio of 9.5 percent, with total buffers of 11.5 percent, before the end of 2018.