Given the chance, not too many borrowers would pass the opportunity to tap into a new group of investors and raising debt capital.
But opportunities aren't given. Instead, they have to be created as the province of British Columbia found out this week when it priced its first so-called Panda bond. The bond — B.C. will borrow 3-billion renminbi on the inshore Chinese bond market — came with a 2.95 per cent coupon and a three-year term.
It's understood the province is the first sovereign to borrow in the Panda market — though at least two international borrowers, the International Financing Corp. and the Asian Development Bank, have raised capital there in the past.
Michael de Jong, the province's Finance Minister, said the bond issue “represents our commitment to build stronger, more robust ties with China's financial and economic markets and the broader Asia-Pacific region. British Columbia's triple-A credit rating gives our Province access to markets and investors we couldn't otherwise reach, and China's onshore market provides access to a diverse, relatively untapped group of investors.”
This week's issue came less than two months after the province was granted approval for a 6-billion RMB program.
It takes time and lots of negotiations to be in a position to raise debt capital in China. And de Jong, the finance minister since September 2012, has invested the so-called hard yards in building links with China. He has been there on six occasions (twice in the past two months) and, to the chagrin of his staff, travels economy class.
Here are some key milestones of what de Jong has been able to achieve:
November 2013: The province became the first foreign government to issue a bond into China's offshore RMB market. In all it raised 2.5-billion RMB, ($428 million) from the sale of a one-year bond priced at 2.25 per cent. At that time the financing was the largest in that market by a foreign issuer. Asian investors (which bought 60 per cent of the issue) and central banks and official institutions (which bought 62 per cent of the issue) were the largest buyers.
November 2014: In its second deal in the offshore market, the province raised 3-billion RMB ($559 million) at 2.85 per cent for two years.
The issue coincided with the announcement by the governments of China and Canada that designated a Canadian RMB trading hub. (While B.C. was vying to be the hub, the decision was made to award it to Toronto.) Until China operates a fully floating exchange rate regime, a domestic RMB hub will make use of renminbi in B.C.-China trade, commerce and investment easier for Canadian financial institutions and their customers.
Barclays on the sheet
What have you done for me lately
In the case of Barclays Canada the answer is a fair bit.
It has got its name on the two large mergers and acquisitions announced this year: the $2.65 billion purchase by Corus Entertainment of Shaw and the $582 million purchase by Aviva Canada of RBC General Insurance Co.
On the Corus/Shaw deal, Barclays, acted for the special committee of Corus as independent financial advisor and valuator (where it opined that Shaw Media was worth between $2.45 billion and $2.85 billion). On the RBC/Aviva deal it acted for the U.K. based buyer and its Canadian unit.
RBC Capital Markets was also involved on those two deals.