National Bank of Canada in inaugural panda bond sale

Fri Nov 4, 2016 5:11am EDT
 
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HONG KONG (Reuters) - National Bank of Canada NA.TO (NBC) has issued a 3.5 billion yuan ($517.7 million) panda bond, the first North American financial institution to do so, after Beijing approved its 5 billion yuan bond program in September.

Market participants say the yuan bond is unlikely to trigger a flurry of issuers to the market, however, unless borrowers require funding in the Chinese currency as the dollar, euro and yen are the currencies of choice for international companies.

Panda bonds, or yuan-denominated bonds sold by foreigners on the mainland, were first issued in 2005 but Canadian issuers have had little need for yuan funding until now.

"One of the real things is just nexus. Canadian banks have historically not been as big in the China sphere - panda bonds give you an onshore hedge, so it is really whether you need the RMB," said Keith Pogson, a Hong Kong-based partner with EY.

The Canadian bank said in a statement issued late on Thursday, the 3-year bond was sold at a coupon of 3.05 percent via China Merchants Securities, Standard Chartered Bank (China) Limited, Agricultural Bank of China Limited, Industrial and Commercial Bank of China Limited and Bank of China.

That compares with the 1.5 percent the lender paid for a 3-year bond CA148060177= it sold in a $100 million issue in August.

NBC, Canada's sixth-largest lender, has a AAA rating from China Chengxin International Credit Rating. International rating agency Fitch has rated the lender A-plus.

"Panda Bonds represent a new diversified funding source and will help us in supporting Canadian companies doing business in China and bilateral investment flows," said Denis Girouard, executive vice-president at NBC.

Panda bond growth had until recently significantly lagged similar yuan bonds sold offshore, or so-called dim sum bonds, but the tide turned last year as issuers switched back to China's onshore market in a bid to raise cheaper funds.   Continued...

 
A sign is pictured outside a National Bank of Canada branch in Ottawa, Ontario, Canada on August 27, 2009.      REUTERS/Chris Wattie/File Photo