DEAL: Bank of China AT1 preference shares

Author: Ashley Lee | Published: 9 Dec 2014

Bank of China's RMB 39.94 billion ($6.5 billion) additional tier 1 (AT1) offering proved the depth of Asia's capital markets. The bank's innovative structure has also set a precedent for the rest of the industry.

This was the first AT1 sold by a Chinese bank, the first offering of preference shares from a Chinese bank – either offshore or onshore; and the largest AT1 globally following the implementation of Basel III. The dollar-settled bonds were priced to yield 6.75% and were listed on October 24.

But the structure of these AT1s differs from those sold elsewhere because they needed to comply with regulations from the China Banking Regulatory Commission (CBRC) and China Securities Regulatory Commission (CSRC), while also appealing to fixed income investors.

The key features of the preference shares were largely dictated by statutes of the CSRC and the CBRC, said Fang Liu, partner at Clifford Chance....