CapitaLand China Trust prices inaugural offshore 600 million yuan bonds at 3.8%

A WHOLLY-owned subsidiary of CapitaLand China Trust : AU8U 0% (CLCT) has priced 600 million yuan (S$112.5 million) in three-year offshore bonds within the Shanghai pilot free-trade zone (FTZ).

CLCT MTN is the first Singapore-based issuer to launch FTZ offshore bonds; these are also CLCT’s first issuance of renminbi-denominated bonds in a Chinese free-trade zone, said CLCT’s manager on Friday (Oct 13).

To be issued on Oct 17 and listed on the Singapore Exchange, the bonds will pay an annual coupon rate of 3.8 per cent, and be due on Oct 17, 2026.

The manager said that the real estate investment trust (Reit) will use the net proceeds from the bond offering to refinance its existing debts, and meet working-capital requirements outside China.

The FTZ bonds will also enable CLCT to access the debt capital markets in China and Hong Kong, beyond Singapore.

Tan Tze Wooi, chief executive officer of the Reit manager, noted that the bonds will expand CLCT’s renminbi-denominated facilities to 18 per cent, from 13 per cent as at the end of June.

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The Reit will then be able to pay down its existing offshore debt in Singapore dollars, and optimise its capital structure for long-term growth.

As CLCT focuses on investments and operations within China, the bond issuance will enhance its funding sources with the local currency renminbi, mitigating the impact of currency risk and exchange-rate fluctuation.

The offshore bonds, registered in the free-trade zone, are cleared by China Central Depository and Clearing, which enables foreign issuers to access the investor pools and products in renminbi terms.

In nature, the FTZ bonds belong to the offshore market. Although they could be in any currency, they are overwhelmingly renminbi-denominated.

Proceeds from the bonds can be remitted outside the Shanghai pilot free trade zone, without specific restrictions, the manager noted.

The Chinese government launched the FTZ bonds in 2016, aiming to promote the internationalisation of the renminbi, and integrate China’s domestic and offshore bond markets, while developing Shanghai’s financial hub status.

The sales volumes of such bonds took off only in late 2022 and rocketed in 2023, as investors were attracted by its relatively higher yields.

According to Bloomberg-compiled data up till mid March, firms sold 29.2 billion yuan in FTZ bonds registered in the Shanghai pilot free trade. The sum is expected to surpass the record 36 billion yuan issued in 2022.

Tan of the Reit manager also said that the launch of the FTZ bond highlights CLCT’s investor and banking support both within and outside China.

“We are pioneering a landmark initiative as the first Singapore real estate investment trust (S-Reit) to issue free-trade zone offshore renminbi bonds, paving the way for wider market acceptance by exposing Chinese institutional investors to S-Reits.”

CMB International Capital (Singapore), DBS and OCBC were the joint global coordinators, lead managers and book runners for the transaction.

Units of CLCT were trading down 0.6 per cent, or S$0.005, to S$0.875 as at 12.24 pm on Friday.