King & Wood Mallesons (
KWM) advised the World Bank in a milestone bond offering that marked many first including being the financial institution’s first Special Drawing Rights (SDR) – denominated bond in the Chinese Inter-Bank Bond Market.
The bonds also marked a milestone for China’s bond market and for the SDR as an international reserve asset as it expands the use of SDRs and helps promote the development of China’s domestic capital market.
Partners Richard Mazzochi and Minny Siu in Hong Kong and Christine Chen in Beijing led the international KWM team.
“We see the issuance of these bonds as a significant step in the ever-growing use of Renminbi, the internationalisation of the Inter-Bank Bond Market and the recognition of the importance of China’s market to issuers from across the world,” said Mazzochi, the lead partner in the deal.
The bonds which had an aggregate principal amount of 500 million SDRs, were priced on 31 August 2016 and issued on 2 September 2016 also demonstrates the active participation of onshore and offshore investors in the Chinese Inter-Bank, the law firm said.
The deal comes as the yuan will be made the fifth global reserve currency in the International Monetary Fund’s SDR basket in October.
KWM has a long history in China’s bond market which is increasingly becoming internationalised. The law firm was involved in the very first panda bond issuance by International Finance Corporation in 2005.
Most recently, KWM assisted the Province of British Columbia (BC), Canada on its issue of RMB 3 billion bonds in the Inter-Bank Bond Market in January 2016.
KWM also advised the underwriters on the RMB 3 billion bond issuance by the Republic of South Korea in December 2015.
The latest deal the law firm assisted in was the first to have the China Foreign Exchange Trading System publish the reference rates for new currency pairs, and the organisation acting as calculation agent.
It’s also the first to facilitate central book-building for the SDR Bonds in the Beijing Financial Assets Exchange and the custody and clearing of the SDR Bonds in the Shanghai Clearing House.
The World Bank bond deal was also the first to hedge the payments due under the SDR bonds and the first to have active participation by offshore investors in subscriptions for the SDR Bonds in the Inter-Bank Bond Market.
