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Issuance and Marketing Strategy in the Local Currency Market A Case Study of the ADB Panda Bonds

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Issuance and Marketing Strategy in the Local Currency Market A Case Study of the ADB Panda Bonds

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    3. Highlights of the ADB Panda Bonds Deal The debut of Panda Bond issued by International Development Institutions The first internationally AAA rated bond available to Chinese investors on the domestic market Catalyst to the opening of Chinese capital market as one of the first foreign issuers Another remarkable achievement for ADB in local currency markets Carefully prepared and successfully arranged one-on-one meetings and roadshows helped the issuer and investors learn about each others effectively, ensuring successful pricing & optimal allocation Book-building and pricing mechanism accurately reflected investor demand at the time, and truly achieved market driven pricing Order oriented allocation ensured bonds are held by real interested investors Close cooperation between the issuer and the lead manager BOCI provided one-stop service from advisory, underwriting, to post-offering support Well-established sales network guaranteed the success of the offering

    4. Table of Contents

    6. Bond Market Structure

    7. Chinas Market Enjoys Exponential Growth

    9. Background In October 2005, The Asian Development Bank (ADB) completed one of the first-ever RMB Bond issuances by a foreign entity in the domestic Chinese market. BOC International acted as the Sole-lead Manager and Bookrunner on this transaction Domestic RMB Bonds issued by foreign entities were christened as Panda Bonds by the Ministry of Finance ADB and IFC were selected as the two pilot issuers in this market ADB and IFC simultaneously launched their issues during the week of 10th Oct, the ADB bond was listed on the Inter-Bank Market immediately following the offering ADBs October offering was the result of comprehensive preparation and planning as well as overcoming numerous issuance hurdles that spanned regulatory and legal aspects, settlement mechanisms and post-issuance arrangements By following international best practices and providing full disclosure, the issuer and lead manager set a precedence and contributed to the development of the local bond market The path blazed by this first issuance has cleared the way for further opening of this market.

    10. Key Regulators

    11. Transaction Overview

    12. Significant Achievements As this is the first of its kind, the ADB Bond deal overcame a significant number of execution hurdles The transaction followed international standards of disclosure and execution, in line with the issuers objective to promote the development of the domestic bond market

    14. Highly Effective Marketing Strategy BOCI was the sole bookrunner tightly coordinating the entire marketing process Supplemented with a syndicate of 7 domestic financial institutions to maximize investor reach and achieve a broad and stable investor base

    15. Highly Efficient Time Table

    16. Fully Leveraging the Syndicate Structure Selection of syndicate members to complement BOCIs strengths The syndicate consistent with domestic practice, and syndicate members stand by underwrite their commitments at the beginning of the deal However, as an innovation to satisfy ADBs desire to achieve a balanced investor base, BOCI as bookrunner allocated the syndicates demand according to quality of demand. This is more common in international debt offerings In order to maximize the syndicates efficiency in communicating ADBs investment merits and pricing rationale, BOCI invested much time and effort to educate and familiarize the syndicate members with the credit story of ADB As the sole bookrunner, BOCI was able to manage the investment story and generate demand tension

    17. Comprehensive Pre-marketing Effort BOCIs top-ranked fixed income research team produced a full report on ADB in Chinese a few days prior to the offering As the domestic investor base did not previously have much exposure to ADB, this was important in their credit assessment and pricing considerations Following issuance of the research report, our research analyst and sales team met with potential investors to assess their preferences, concerns and demand levels prior to the official launch of the deal BOCI has conducted pre-marketing one-on-one meeting with over institutional 14 investors Only large size potential anchor investors were approached at this stage The feedback was important in allowing us to recommend and set an accurate price range for the offering

    18. Roadshow

    20. Pre-Offering Phases November 2004, Chinese government gave policy approval for Panda bond issuance

    21. The Role of The Sole Lead

    22. Marketing Plan And Investment Story (1) PRE-MARKETING:

    23. Marketing Plan And Investment Story (2) Road Show:

    24. Marketing Plan And Investment Story (3) Investment Story:

    25. Pricing Parameters The pricing achieved was 25 bps over comparable Chinese Treasuries One must note that only Chinese Treasury coupons are tax-exempt whereas Panda bond holders are subject to income taxes, taking that into account, the pricing is extremely favorable

    26. Investors & Allocation

    27. Positive Media Reactions

    28. Highlights of the Deal The debut of Panda Bond issued by International Development Institutions The first internationally AAA rated bond available to Chinese investors on the domestic market Catalyst to the opening of Chinese capital market as one of the first foreign issuers Another remarkable achievement for ADB in local currency markets Carefully prepared and successfully arranged one-on-one meetings and roadshows helped the issuer and investors learn about each others effectively, ensuring successful pricing & optimal allocation Book-building and pricing mechanism accurately reflected investor demand at the time, and truly achieved market driven pricing Order oriented allocation ensured bonds are held by real interested investors Close cooperation between the issuer and the lead manager BOCI provided one-stop service from advisory, underwriting, to post-offering support Well-established sales network guaranteed the success of the offering

    30. Requirements Under Current Interpretation

    31. Pricing Analysis The benchmark treasury bond Other comparable domestic issues, such as the China Development Bank (for financial institutions)

    32. Comparables Pricing

    34. BOCI: A Unique Fixed Income House

    35. BOCI: BOCs Investment Banking Arm

    36. Strength of BOC Group

    37. Leadership In The Domestic Debt Market

    38. Leader In The Domestic Bond Market

    39. Unique Position in International Debt Markets

    40. Senior Roles in Major G3 Currency Bond Offerings

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