Following the publication of relaxed regulations, there
has been a steady stream of PRC issuers listed offshore looking to
tap the local PRC debt markets with "Panda Bonds" issued
domestically in the PRC by offshore entities.
This new breed of bonds are attractive to potential issuers as
the coupon rate is much lower compared to U.S. Reg. S issues and
are structured without a security package.
Demand for these bonds has also been driven by lower interest
rates in China, coupled with a desire to hold debt in Renminbi due
to the currency's recent decline against the U.S. dollar.
Reports indicate that approximately RMB115 billion in Panda Bonds
have been issued from December 2015 to the end of March 2016, a
significant portion by Chinese developers. That said, it has not
been plain sailing with concerns rising over the protracted
regulatory and procedural delays with Panda Bonds, and restrictions
on the issuers' ability to use offshore funds that have been
In contrast, Chinese-listed developers, have so far shied away
from the Hong Kong debt capital markets but signs are that this may
be about to change with the recent closing of China Aoyuan Property
Group Limited's US$250 million Reg. S bonds which priced its
offering at 6.25%, significantly lower than the developer's
current borrowing costs, which are around 12%. In addition, the
offering was massively oversubscribed indicating a high demand for
high-yield dollar-denominated offerings.
Panda Bonds have been a welcome addition to the corporate debt
landscape for offshore issuers but the China Aoyuan transaction is
a reminder that Chinese corporates, listed offshore, will be able
to take advantage of the different rates available in Hong Kong and
domestically for a while to come.
Conyers Dill & Pearman is actively assisting PRC bond issuers in the Hong Kong and PRC debt
markets. The Hong Kong office acted as Cayman Islands and British Virgin Islands counsel for
China Aoyuan, led by Paul Lim and Rowan Wu.
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guide to the subject matter. Specialist advice should be sought
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