B.C. deepens its India bonds
COMMENT
BOff the Record ritish Columbia, the only province with a triple- A- credit rating, will make some financial history Friday when it closes its latest international borrowing.
Or to be perfectly precise the province will continue to make financial history when a five billion- rupee borrowing closes. But that borrowing — equivalent to US$ 75 million — is not a “normal” rupee borrowing. The borrowing was done in the Masala bond market — or the offshore market for Indian rupees (i.e. outside of India).
B.C.’s breakthrough: it is the first foreign government entity to tap the one-year-old Masala bond market. The B.C. bonds will be listed on the London Stock Exchange.
Being first into a new market is not unusual for the province. In 2013 it became the first foreign government to issue bonds in the offshore Chinese renminbi market; in late 2015, and, in early 2016, it became the first foreign government to issue a domestic bond in the so- called Panda market.
Why be out in front? Michael de Jong, finance minister, said the “bond issuance offers British Columbia a means to become well- positioned to profile our confidence in the outlook for India, and to participate in the internationalization of the Rupee and India’s economy.” There is another first mover- advantage: getting the province’s name in front of investors and the Indian business community is never a bad thing because of potential trade and investment benefits.
B. C.’s deal is also noteworthy on timing grounds because next month, Premier Christy Clark is leading a trade mission to India. Education, agrifoods, clean technology, life sciences and finance will be the mission’s focus — all part of a plan to open and expand markets for its goods and services.
While there are some links at present — India is B.C.’s sixth- largest export market and there has been a large increase in Indian students coming to B.C. — the feeling is that more can be done.
B. C., which has t hree trade and investment offices in India, has set a stronger wood brand in India as one key objective. Forest Innovation Investment, a provincial market development agency for forestry products, is leading that charge.
Jamie Edwardson, the communications director for the province’s finance department said that hope is to generate similar results to what occurred in China. “We have had some good success in getting our wood products in China. It is now one of our largest markets,” he said.
B.C.’s Masala bond issue — which has a term of three years four months, carries a coupon of 6.62 per cent and requires payment in U.S. dollars — was different in one key area: none of the proceeds flowed to the province.
Instead they were invested in a Masala bond issued by India’s Housing Development Finance Corp. (HDFC).
The good news: that trade, whereby the province will pay one rate but receive a higher rate on its HDFC investment, will generate a positive return for the province of about $2 million.