OREANDA-NEWS. January 16, 2015. The Beijing-based ICBC announced that it had completed pricing of its RMB34.6 billion offershore preference shares offering(equivalent to approximately USD5.64 billion). Given the Bank’s industry-leading position in China, consistently outstanding performance, remarkable risk control capacity as well as a BBB+ rating granted by Standard &Poor's, the issue generated fervent responses in the markets and closed with 4.9 times subscribed.

Denominated in three currencies (USD, EUR and RMB), this offshore issue was the first of its kind completed by a Chinese bank, and a new type of capital instrument that meets the Basel III standards. The USD- and RMB-denominated portion carries a fixed rate of 6% for the first five years; and the Bank has the right to redeem part or all of the underlying preference shares on December 10, 2019 and the interest payment date of each year after 2019. The EUR-denominated portion carries a fixed rate of 6% for the first seven years; and the Bank has the right to redeem part or all of the underlying preference shares on December 10, 2021 and the interest payment date of each year after 2021.

Attracting investors all over the world

As both Rule 144A and Regulation S are applied in the terms and conditions of the issue, global institutional investors including those in the United States could participate in the subscription. According to the sales records available to the reporter, the total amount of subscriptions amounted to USD27.775 billion, of which 84.7% was attributed to Asian investors, 7.1% to the Middle Eastern investors, 5.6% to American investors, and the remaining 2.6% to European investors.

A boost to ICBC's internationalization journey

The Bank has been steadily forging ahead with its international strategy, and committed to improving its global network and financial service capacity. In recent years, it has completed a series of equity acquisitions, including 80% equity interest in the Bank of East Asia (U.S.A.), 80% equity interest in Standard Bank Argentina S.A., and 60% equity interest in Standard Bank Plc. Meanwhile, the Bank also proceeds with the application for and establishment of new branches. The latest statistics show that by the end of June 2014, ICBC had 331 overseas institutions in 40 countries and regions worldwide, with a service network covering the world's major economies and international financial centers.

Through many rounds of communication with global investors and by fully leveraging the convenience of the offershore preference shares offering, ICBC showcased its strength as the world's biggest commercial bank and further demonstrated to the world its determination to go international. Moreover, the responses in the European and American capital markets to this issue also manifested the recognition by the international markets of the Bank's financial strength and unrivalled business advantages, which will help the Bank further consolidate its global service capacity steadily.

Establishing offshore RMB markets and diversifying overseas RMB investment tools

With the unfolding of its internationalization process, yuan’s position as a financing currency has been gradually accepted in overseas markets, which has resulted in a significant increase in both the supply of and demand for RMB bonds in overseas capital markets.

However, overseas RMB investment tools available now are still relatively few, mainly restricted to bank deposits and dim sum bonds. The "dual-currency dual-stock" policy launched by the Hong Kong Stock Exchange lately has permitted the issue of RMB-denominated shares, but to date, only two companies have done so in Hong Kong. The options available to investors are still limited.

Against such a backdrop, the RMB-denominated portion of ICBC’s offershore preference shares offering had drawn extensive attention from investors. The 12-billion-yuan RMB preference shares were hotly sought after during the issuance process and 2.6 times over-subscribed. Such an innovation has diversified the types of overseas RMB investment tools, offered more options to investors, and fully demonstrated the active demand of global investors for offshore RMB products.