A successful renminbi bond issue by Russia's VTB Bank has shown that even emerging market issuers can sell Chinese currency bonds relatively easily.
The Russian bank's Rmb1 billion ($152 million), three-year 2.95% bonds, issued on December 10 2010, made it the first non-Asian emerging market issuer of so-called dim sum bonds (renminbi-denominated bonds issued from Hong Kong) since restrictions were lifted in February 2010.
To complete the deal, foreign issuers need to gain regulatory approval from Beijing to move the bond proceeds from Hong Kong to mainland China.
While Chinese approvals tend to be opaque and slow, Simon Ovenden from issuer's counsel Cleary Gottlieb Steen & Hamilton said the regulatory approval process was straightforward and the transaction wasn't as difficult as expected.
"I think it's a good thing that people don't feel that they're going to have to tie themselves up in knots to be able to do a deal," he said.
VTB Bank issued the bond as part of its existing medium-term note programme listed in Ireland, making it relatively straightforward.
And given that VTB's dim sum bond yield was 2.95% compared with its five-year US dollar bond yield of 5.9% (according to Bloomberg data), the signs are good for the burgeoning sector.
"I think it's a landmark deal for the market," said Ovenden. "We've had a lot of enquiries since we've done the deal, so I think it has been an important year for dim sum bonds."
He added that he is working with some non-Russian emerging markets companies looking to issue dim sum bonds in the near future.
Cleary Gottlieb Steen & Hamilton advised the issuer, VTB Bank. Linklaters advised the underwriters VTB Capital and HSBC. LB