NDB Successfully Issued First RMB-Denominated Green Financial Bond
The New Development Bank is pleased to announce today that on 18 July 2016 it successfully issued its first Green Financial Bond with issue size of RMB 3 billion, tenor of 5 years in the China Interbank Bond Market. The bond’s nominal interest rate is 3.07%.
The total subscription amount of Bank’s first bond reached more than RMB 9 billion and the cover ratio reached 3.1. More than 30 investors participated in the bond book building.
This is the first time that an international financial institution issued a Green Financial Bond in the China Interbank Bond Market. It is also the first time for the NDB to tap the capital market.
K.V. Kamath, President of the Bank said, “Following the approval by the Board of Directors of our first batch of four projects in April 2016, the successful launch of our inaugural green bond is the next significant milestone for the Bank.” “Multilateral development banks like the NDB raise the bulk of their resources for lending by issuing bonds on the capital markets. We are therefore extremely delighted with the response from investors on our inaugural bond issue, given that we had no historical track record. Furthermore, it reinforces our belief that in addition to accessing global capital markets, considerable scope exists for the NDB to raise funding from local capital markets of the BRICS member countries.”
The proceeds of the bond will be used for infrastructure and sustainable development projects in the BRICS and will follow the green guidelines as set out by the People’s Bank of China (PBOC) in December 2015. A portion of the proceeds from the bond will be converted through cross currency swaps into US Dollars to be lent to member countries.
In line with its focus on sustainable infrastructure, the first four projects of the Bank are all aimed at augmenting the supply of renewable energy in the member countries contributing to the transition towards a green economy.
The NDB CFO, Leslie Maasdorp said, “We selected China as the first market to issue our inaugural bond in recognition of the fact that it is the world’s third largest bond market with sufficient depth and liquidity for us to attract a wide investor base.” He added that “the NDB will continue to explore further local currency bond issuances in China as well as other member countries. We intend to actively promote the development of green finance and become a frequent issuer in the Chinese interbank market.”
The NDB engaged Bank of China Ltd. (BOC) as the lead underwriter and book runner, and Industrial and Commercial Bank of China Ltd. (ICBC), China Construction Bank Ltd. (CCB), China Development Bank Corporation (CDB), HSBC Bank (China) Company Ltd. (HSBC) and Standard Chartered Bank (China) Ltd. (SCB) as joint underwriters for the Bond.
The NDB received AAA institutional rating and also AAA rating for its bond from leading domestic rating agencies China Chengxin International Credit Rating Co., Ltd. and China Lianhe Credit Rating Co.,Ltd.
Ernst & Young Hua Ming LLP has undertaken third party pre-assurance verification for the bond in accordance with the Green Bond guidelines issued by PBOC.
The New Development Bank was created with a vision to support and foster infrastructure and sustainable development initiatives in emerging economies. The Bank will complement the efforts of other existing financial institutions to realize the common goal of global growth. The founding members of the NDB – Brazil, Russia, India, China and South Africa (BRICS) – have brought in capital of USD 1 billion as initial contribution. Most of the policies and procedures for all functional areas of the Bank were approved at the Board of Directors meeting in January 2016. With the signing of the Headquarters Agreement with the Government of the People’s Republic of China and Memorandum of Understanding with Shanghai Municipal People’s Government in February, the Bank has become fully operational.
In April 2016, the New Development Bank announced the approval of its first batch of four projects involving financial assistance of USD 811 mln. These loans support renewable energy projects in BRICS countries of 2.370 MW of renewable energy capacity. With that announcement, NDB gave effect to its intent to fast track the process of delivering infrastructure projects and reduce overall loan processing time having only opened its doors in July 2015.