B.C. marks return to China’s Panda market

‘Opportunities for businesses to prosper’

Getting in under the wire via a borrowing program that opens up a new group of investors is probably not a bad strategy.

That’s what the province of British Columbia is doing with a new Panda Bond issue. The province is raising one billion Renminbi (RMB) ($ 192.5 million) for a threeyear term. The offering, led by the Bank of China and HSBC, was priced Wednesday. Investors, who will receive a 4.80-per-cent coupon, are getting the highest quality paper, as B.C. is the only provincial borrower that’s AAA-rated.

As for raising capital in China, B.C. Finance Minister Carole James said: “By engaging in the Panda Bond market, we create opportunities for B.C. businesses to prosper and diversify our growing provincial economy. The steps we are taking now will help ensure a future of sustainable growth and opportunities for our province and British Columbians.”

B.C. is the first foreign government to establish a Panda bond program, a bond offering that’s sold in the onshore Chinese market. In this way, Panda’s are different from a dim sum offering, which is sold outside China. In both cases, the borrower receives Renminbi. Various reports have indicated that the growing strength of the Panda bond market has come at the expense of the dim sum market. ( B.C. has also borrowed in the dim sum market.)

For B.C., the offering is its second in the Panda market. In 2016, it placed 3- billionRMB ($ 665 million) at 2.95 per cent for three years.

But as part of the process for getting approval for that borrowing, B. C. was given the go- ahead to raise a total of 6 billion RMB. That program included pre-approved conditions on subsequent bonds to a maximum of 3 billion RMB. The program expires on Dec. 3, 2017.

If precedent is followed, B.C. will invest the proceeds from the offering in an offshore RMB- denominated investment with Singapore’s United Overseas Bank. That investment comes with two advantages: it will generate a positive return and protect against foreign exchange risk. On its 2016 deal, B. C. used the net income on the RMB investment to support and expand its trade and investment offices in China.

IPO WOES

The miserable year for Canadian initial public offerings continues with news that another issuer has abandoned plans to raise equity capital from a new group of investors.

AQTWM, Inc., which defines itself “as a growth- oriented oilfield water management and logistics company that provides water disposal services to Canadian and U.S. onshore oil and natural gas producers,” is the latest to feel investor wrath.

The company, which prior to the planned offering was wholly owned by Bregal Investments, a private equity firm, was seeking $ 65 mil- lion via the sale of common shares priced in the $ 10-$ 11 range. After the planned sale, the former owners would have owned about 68 per cent.

When the preliminary prospectus was filed in early October, the plan was to price the offering in the week of Nov. 13 and close it this week.

But AQTWM met t he same fate as Bento Inc., whose planned $ 80- million raise was called off over the summer. Bento, the sushi industry leader in Canada and the number two producer in North America, was planning a part- treasury largely secondary offering.

For Bento’s owners there has been a silver lining: this week YO! Sushi, which calls itself the iconic Japanese restaurant group, announced it had acquired Bento Sushi. Terms were not disclosed but a British firm, Mayfair Equity Partners, which partnered with the YO! management team as part of a management buyout in 2015, facilitated the transaction. And Bento’s two senior executives will become “significant shareholders” in the combined group.