US$1 billion bonds issued in New York
By Da Shan (China Daily)
Updated: 2004-09-30 01:42

The China Development Bank -- the largest of the country's three policy banks -- issued US$1 billion worth of global bonds in New York Wednesday.

The bonds consist of US$600 million in 10-year bonds with an interest rate of 4.75 per cent and 325 million euros in 5.5-year bonds with interest rate of 3.875 per cent, bank leaders said in a statement.

The bank has not raised funds on the international capital market since 2000.

Investment banks such as BNP Paribas, Goldman Sachs, Merrill and Morgan Stanley have been mandated as major underwriters of the sale, bank officials said.

The bonds raised will be used to fund key infrastructure projects.

Chen Yuan, the bank's president, said the issuance suggests that international investors have confidence in China Development Bank and China as a whole.

Wei Qi, a senior analyst with the Beijing-based China Securities, said Chinese banks need to issue such bonds to back their business expansions.

"The demand for foreign money is enormous," she said.

The relative low costs on international markets is also a major reason for banks to issue such bonds.

Niu Li, an economist with the State Information Centre, said domestic companies and banks should be allowed to raise money through various channels.

"Since China's economic strength has been beefing up, domestic banks should be encouraged to issue foreign money bonds," Niu said.

China Development Bank, together with the Export-Import Bank of China, won government approval in June to issue US$1 billion worth of bonds on overseas markets.

The bank's bonds were rated by the international rating agency Standard & Poor's (S&P) as "BBB plus."

The rating reflects the bonds' strong full support from the Chinese Government, their sole owner, and the bank's key role as the country's preeminent development institution to support major public investment. Its efforts are particularly apparent in the central and western regions, according to S&P credit analyst Ping Chew.

China Development Bank enjoys unique access to short-term liquidity from the central bank to support debt service payments and to bridge timing differences between the receipt of debenture proceeds and project loan payments, Chew said.

"Although this is not equivalent to a sovereign guarantee on the bank's debt, it is stronger and more explicit support than provided to other Chinese financial institutions," he said.

Chew noted the bank's assets quality look to be better than most in the Chinese banking system, due to the bank's own tight credit controls, and its implicit preferred creditor status with local governments.

"Furthermore, it is one of the few Chinese banks that have its financial statements audited by an international auditor and presented in accordance with international accounting standards," Chew said.

Moody's Investors have given a prospective "A2" foreign currency rating and Fitch Ratings assigned an "A minus" to the bank's bond issuance.

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