Tightening credit policies on Mainland China have driven strong growth in debt capital raisings in Hong Kong – with some lawyers predicting a bumper year for bond issues for the North Asian market.
A growing trend of deals such as the recent US$750m and US$500m dual-tranche issuance of hybrid capital securities and senior notes by conglomerate CITIC Pacific has led to robust predictions for the remainder of the year. Clifford Chance acted as lead counsel to CITIC Pacific in that deal.
According to Clifford Chance capital markets partner Connie Heng, the capital markets team from the firm has witnessed a notable surge in the number of Chinese companies looking to raise funds offshore. “In recent month, we’ve seen growth in the volume of Chinese companies with PRC operations come to market in Hong Kong,” Heng said. “As credit policies tighten in China, Hong Kong will continue to see a strong pipeline of deals. This looks to be a golden year for bond issues in North Asia.”
Heng led the firm’s capital markets team in its advice on the dual-tranche issue of PRC state-owned enterprise CITIC Pacific in its US$750m hybrid capital securities and US$500m senior debt notes issue in Hong Kong. She was assisted by partner Matt Fairclough. This marks the first time in a decade that CITIC Pacific has tapped the international debt capital markets and is also the third corporate hybrid issuance on which the Hong Kong team has advised, the US$1bn perpetual securities issue by Cheung Kong Infrastructure Holdings was followed by the recent US$350m perpetual securities issue by Noble Group in November 2010.
“We have seen a number of significant hybrids coming onto the market recently. We also see a continuing appetite for hybrid issuances throughout the Asia Pacific region. There has been increasing levels in bank corporate level issuance and we anticipate globally that banks will be delving into the subordinate debt markets to strengthen their regulatory capital,” Fairclough said.
“Gradual relaxation of foreign exchange and cross border remittance rules by the PRC Government has also led to more companies with PRC operations seeking funding offshore,” Heng said. “This has brought a new breed of issuers to the international bond markets, such as PRC state-owned companies and H-share companies.”
Linklaters also advised on the two deals by Citic Pacific, in the capacity of international counsel to the lead managers.ALB
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