Shanghai-based BRICS bank set to raise 3 billion yuan from green bond issuance

PUBLISHED : Tuesday, 12 July, 2016, 9:54pm
UPDATED : Tuesday, 12 July, 2016, 11:00pm

The BRICS-backed New Development Bank has is gearing up for its first capital raising in Shanghai, aiming to net 3 billion yuan (HK$3.5 billion) of proceeds from a green bond issuance to replenish its coffers.

The yuan-denominated bond sale set for July 18 is expected to carry an annualised interest rate of between 2.8 per cent and 3.6 per cent, the bank told institutional investors at a meeting on Tuesday.

Proceeds from the green bond sale will mainly target green and clean energy projects.

“This is helping us establish a name among global investors,” Leslie Maasdorp, the lender’s vice-president and chief financial officer, told the South China Morning Post. “It will enable us to be in a smooth and streamlined condition to do our next follow-up issues.”

The Shanghai-based bank, jointly set up by Brazil, Russia, India, China and South Africa – the so-called BRICS emerging economies – have received a green light from the People’s Bank of China to conduct bond sales worth a total of 10 billion yuan on the mainland.

Maasdorp said the second tranche of bond sales in China will be carried out within the next few months.

New Development Bank, formerly called BRICS Development Bank, officially inaugurated its operations a year ago, with its initial capitalisation of US$50 billion evenly contributed by the five member countries.

This is helping us establish a name among global investors
Leslie Maasdorp, New Development Bank

It is one of the two policy banks heavily backed by Beijing that are being pitched as alternatives to established global institutions such as the World Bank.

The Asian Infrastructure Investment Bank, a multilateral lender initiated by Chinese President Xi Jinping, is a China-led institution with Beijing as the single largest shareholder.

However, there have been mounting doubts about the bank’s growth prospect since nearly all of its BRICS members are grappling with either a severe economic slowdown or are mired in recession.

But Maasdorp played down the fears, insisting that the New Development Bank was taking a long view on its investment.

A clutch of major state-owned banks in China, including Bank of China, Industrial and Commercial Bank of China and China Development Bank, are underwriting the bond issuance.

The majority of buyers will be Chinese institutions, but the bank will look at broadening its investor base amid further financial liberalisation on the mainland, Maasdorp said.

Shanghai’s government announced last month it would create a bond market in the free-trade zone to reinforce the yuan’s bid to become an international currency.

At the mini-Hong Kong-style free marketplace, bond sales will target global investors to encourage their active participation in the mainland’s debt market.

“We’ll look at it very closely,” said Maasdorp. “We are very interested in that concept.”

In the past year, New Development Bank has completed investments worth US$800 million in four projects.

The proceeds from the bank’s yuan-denominated bond sales can be invested both onshore and offshore.