MILAN, Aug 1 (Class Editori) – CDP, the Italian Deposit and Consignment, received orders well above the offered amount for the placing of its first Italian Panda bond. The 1-billion-yuan issue (around 130 million euros), defined "exploratory" by the Italian Minister of Economy Giovanni Tria, was meant for institutional investors active in the Chinese bank-to-bank bond market.
The operation also served as a testing field for Italy-China relations. The shares will last three years, will expire in August 2022, and come with a 4.5 percent coupon and a 100 percent price. The issuing falls within the 5 billion of the 2019 Renmibi Bonds program, receiving formal authorization from the Chinese central bank last week. The gathered resources will go in support of Italian enterprises (and of their subsidiaries) producing in or exporting to China.
Furthermore, this issuing allows CDP to follow up with one of the objectives included in the protocols signed in February and in August – with Unicredit and Intesa Sanpaolo respectively – aimed at funding SMEs through yuan-denominated instruments, thus mitigating exchange and interest risks. Bank of China acted as Lead Underwriter and Book Runner, while China Development Bank, Goldman Sachs, Gao Hua Securities, HSBC, ICBC, and JP Morgan Chase Bank played as joint Underwriter and joint Book Runner.
The China Chengxin International rating company gave CDP AAA and a stable outlook. A rating that goes far beyond those expressed by Western agencies. The CDP rating is, in fact, in line with that of Italy: for Standard&Poor's and Fitch it is a BBB with a negative outlook, while for Moody's it is Baa3 with a stable outlook. Confidential treatment is not new. In general, everything issued by China is triple A or AA+ or AA. Even Hungary was considered AAA when in December it placed Panda sovereign bonds for 2 billion yuan, while the rating of the three sisters were BBB, Baa3 and BBB.
"We want to achieve more structured financial support for companies in China to face the growing demand for Made in Italy," Palermo underlined, opening the Italian-Chinese Financial Forum on July 11th in Milan.
The CDP Panda Bond, the first Italian issuer and the first Italian institute promoting Europe to move in this direction, represents a test bench for economic and financial relations with Beijing. After 14 years from the launch (the International Finance Corporation and of the Asian Development Bank were the firsts issuers) these instruments are still in the early stage, reported Kmpg a year ago. In 2018, there were 175 issuers for 96 billion yuan in total. Most of the issues of 2005 expired in 3 to 5 years, never more than 10.
Compared to the entire Chinese bond market – the third one in the world which is about to get ahead of the Japanese one – the Panda bond market is still small (the volume has been 316.5 billion yuan since 2005) and affected by regulation changes. Furthermore, it suffers from the lack of awareness about the issuers. For example, Hungary has placed its 2 billion at three years at a rate of 4.3 percent. The issue with the same maturity and the same denomination of the Emirate of Sharjah, one of the United Arab Emirates, at 5.8 percent.
(Source:Class Editori)
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