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dam-l (Fwd) FT April 15, 199: Chinese Bank Plans $500m Global Bond
------- Forwarded Message Follows -------
Date sent: Thu, 15 Apr 1999 15:51:32 -0700
From: Doris Shen <threegorges@irn.org>
Subject: FT April 15, 199: Chinese Bank Plans $500m Global Bond
To: irn-three-gorges@igc.org
Financial Times April 15, 1999
Chinese bank plans $500m global bond
by James Harding in Beijing
China Deelopment Bank, the main channel of government funding for the giant
Three Gorges dam, is planning to launch a $500m global bond next month.
The bank will be the first Chinese financial institution to issue a global
bond since the outbreak of the Asian crisis in the middle of 1997. If
successful, the debt issue could prompt other Chinese borrowers to return
to the global capital markets.
Some of the proceeds are likely to be directed to the huge and highly
controversial Three Gorges hydro-power plant which has run into
fund-raising difficulties in a critical year of construciton. Officials at
the world's largest civil engineering project said last month the $24.5bn
Three Gorges development is facing an Rmb 25bn ($1.9bn) shortfall.
Three Gorges, which has budgeted on borrowing $5.5bn overseas, has also
faced problems raising funds abroad. Foreign banks, particularly in the US
have grown increasingly unwilling to be seen to be participating in Three
gorges financing, which could damge their reputations with some domestic
customers htat oppose the project largely on environmental grounds.
China Development Bank, the policy bank for infrastructure lending formerly
known as the State Development Bank, is committed to lend Rmb 130 bn, or 65
per cent, of the funds for the Three Gorges project.
The bond issue is intended to take advantage of the improvement in investor
sentiment towards Chinese risk. The bank had to postpone the launch on
several occasions, particularly after the abrupt closure last year of
Gitic, a prominent Chinese investment company, rattled international
confidence in the creditworthiness of Chinese borrowers.
The details of the issue are still to be finalised. Merril Lynch and
Salomon Smith Barney are co-lead managers. The bond is likely to have a
maturity of five to 10 years. Pricing will be made public in May.
A successful issue could prompt China International Trust and Investment
Corporation (Citic), the largest state investment company, to revive plans
for a global bond issue that were put on hold late last year. As a
government policy bank, China Development Bank is treated as
quasi-sovereign risk. Standard & Poor's, the credit rating agency, ahs
rated China Development Bank at BBB plus, the same as China's soverign debt.
However, the markets still make a distinction between the policy bank and a
stirctur government issue, pricing the 10-year bond issued by the State
Development Bank in January 1997, the last time it made a global issue, at
about 60 basis points over China's 2008 soverign debt. Moody's, another
agency, rates the China Development Bank as Baa1, a notch below the
sovereign rating.
China issued a 10-year sovereign bond at the end of last year, which just
after the launch was trading at around 280 basis points over US Treasuries.
_________________________
Doris Shen
International Rivers Network
Three Gorges Campaign
Tel: 510.848.1155 ext. 317
Fax: 510.848.1155
Dianne Murray, Coordinator/Webmistress
Dam-Reservoir Working Group; Ottawa, Canada
Dam-Reservoir Impacts and Information Archive
http://www.sandelman.ottawa.on.ca/dams