OREANDA-NEWS. May 19, 2011. ICBC, as the lead underwriter, underwrote RMB 5 billion worth of bonds via private placement for Aviation Industry Corporation of China (AVIC) in the domestic interbank market. This is the first private-placement bond issued in China, marking the country's latest effort to deepen its non-financial corporate bond market, reported the press-centre of ICBC.

According to ICBC, China's National Association of Financial Market Institutional Investors, or NAFMII, published the Rules on Private Placement of Debt Instruments of Non-Financial Firms in Interbank Bond Market on April 29. The Rules stipulate general principles, registration, issuance, custody, circulation, information disclosure, self-disciplinary management and market restrictions. As the largest Chinese commercial bank offering the largest variety of bonds with the biggest size of bond issues, ICBC became the lead underwriter for the first batch of private-placement bonds by following the issuing rules. Working closely with the NAFMII and the issuer in well-planned preparation, ICBC was taking active measures to push forward the registration and issuance of private-placement bonds. It managed to pass through the application and review process of a RMB 5 billion private-placement bond issue for AVIC and kicked off the issuance.

Unlike public offerings, a private-placement bond is a debt instrument issued to a limited number of investors and can only be sold and circulated among a group of investors rather than general public. Bond issues via private placement are common and have a long history in developed European countries and the US. Due to its limited availability to a smaller group of investors, private placement is more flexible, easier to issue, and has simpler requirements for information disclosure to help the issuer obtain funding in a more effective and flexible way.

According to industry experts, as China's debt market grows, bonds via private-placement can effectively ease the limitation of public offerings, deepen the debt market, and considerably increase the proportion of direct financing. For investors, the launch of private-placement bonds offers a much wider variety of investable products, with relatively higher returns compared to public bonds offerings. To invest in private-placement bonds, investors need to be able to judge and bear the investment risk, which can effectively help enhance their capability of identifying risks and managing their investments. The group of investors of privately placed bonds is selected by the issuer and the lead underwriter before bonds are issued. The lead underwriter must be more market sensitive and have a greater influence, forcing it to make due diligence in carrying out its responsibility and increasing its underwriting ability.