The Chinese oil major Sinopec is seeking a US$2.5 billion syndicated loan. The borrower has mandated China Construction Bank, Bank of Tokyo-Mitsubishi UFJ, Citi, HSBC, RBS and United Overseas Bank as mandated lead arrangers for the transaction, which pays a margin of 1.23 per cent over Libor, according to a term sheet seen by the South China Morning Post.

By borrowing in dollars, Sinopec is getting a better absolute rate than in yuan, and they would likely build in an expectation that the US dollar will depreciate against the yuan. Six-month Libor is currently at 0.3455 per cent.

“If they were borrowing onshore in yuan it would likely be at 90 per cent of the PBOC determined rate, which is about 6 per cent. Without anyone being a rocket scientist its clear the offshore rate is cheaper,” said Anup Kuruvilla, managing director, loan syndications  Asia, RBS.