ICBC Seeks to Avoid Extra Paperwork in $5.7 Billion Basel SaleChristopher Langner
Industrial & Commercial Bank of China Ltd.’s Basel III-compliant bond issue will be structured more simply than Bank of China Ltd.’s to avoid the extra paperwork caused by that offer’s currency pricing.
The nation’s largest lender by market value has said the par values of its planned $5.7 billion sale will be $20 per dollar-denominated note, 15 euros ($18.70) for a tranche in that currency and 100 yuan ($16.26) for a Dim Sum portion, according to the offering circular. Bank of China’s $6.5 billion issue of offshore additional Tier 1 notes in October was originally priced in U.S. dollars, divided by the yuan rate.
Chinese banks have sold $72 billion of securities that count as capital this year, more than lenders anywhere else, as bad debts soared and the economy grew at the slowest pace in five years. The amount surpasses what financial institutions raised in France and the U.K. combined and is more than three times what U.S. banks have issued to strengthen their books.
Bank of China subsequently changed trading in its Tier 1 notes to yuan, meaning all trades that had been done before the switch had to be rebooked.
Its Oct. 16 offering was the biggest single tranche U.S. dollar bank capital sale. As per Chinese regulations, the securities had a 100 yuan par value.
Settlement was in the U.S. currency at a fixed rate of 6.1448 yuan per dollar. Because of that, each note had a dollar value of $16.274 and the broken numbers didn’t conform to bond market conventions. The currency was switched to yuan several days later.
In July, ICBC’s board approved a plan to issue as much as 35 billion yuan of preferred securities offshore that count as additional Tier 1 capital under new banking regulations.
The lender has been meeting investors since Nov. 26 in preparation for the deal, which is expected this week.