China’s Largest-Ever CoCo Issuance Could Raise Over $1 Trillion
Shanghai Pudong Bank locked up a whopping 7.8 trillion yuan from a convertible bond issuance that was 300 times oversubscribed, amidst eased fundraising conditions and investor demand for safer assets.
The bank was seeking to raise 50 billion yuan ($7.1 billion) to help replenish its capital, according to an exchange statement, and its issuance was remarkably well received, leading to an oversubscription that totaled $1.1 trillion. In addition to core first-tier capital replenishment after conversion into stocks, proceeds will also be used for business expansions.
Sales of convertible debt, or CoCos, have been spurred by China’s easing of capital access by lenders which will be especially key when considering increased foreign competition next year when it fully scraps ownership restrictions by overseas investors.
Elsewhere, foreign banks have been cautious about investing in the financial sector due to risks linked to a flat yield curve. Bank of Singapore told finews.asia in an interview that it was particularly wary about concentration risk in bank CoCos and AT1 securities.
