The first official Belt and Road bond in China's domestic market has introduced a new financing instrument for the massive infrastructure initiative but offered few advantages for the issuer.
Hongshi Holding Group, a privately owned cement maker, printed the $300 million yuan ($47 million) three-year corporate bond on the Shanghai Stock Exchange on January 19. Proceeds are earmarked for the purchase of equipment for a $300 million yuan cement plant in Laos with an expected daily capacity of 5,000 tons.
The new Belt and Road bond category has the blessing of the China Securities Regulatory Commission, the regulator of the exchange-traded bond market, and the Shanghai bourse was quick to tout the achievement as a sign of its support for President Xi Jinping's signature economic initiative.
Market participants, however, were less impressed.
"It is just a new label under the CSRC," said a source close to Hongshi's deal. "It does not seem to bring pricing benefit for issuers and it doesn't guarantee that the proceeds can be used offshore."
Hongshi, rated AAA by China Chengxin, priced the three-year notes at par to yield 6.34%. The offering was 2.67 times covered, according to a press release from the SSE.
After multiple self-labelled BRI and Silk Road bonds from Chinese banks and corporate issuers, both offshore and onshore, in the past few years, the official label suggests that China's regulators are seeking more control over the use of the term.
The National Development and Reform Commission, the country's main economic planner, said last year it would provide better guidelines to curb risks associated with the infrastructure programme.
Hongshi's Laos project is listed as a key Belt and Road initiative by the NDRC in Zhejiang Province, where Hongshi is based, according to the bond prospectus.