TOKYO - Bank of Tokyo-Mitsubishi UFJ (China) Ltd plans to raise 1 billion yuan ($146 million) from the first local-currency note sale in the mainland by an overseas company.
The unit of Mitsubishi UFJ Financial Group Inc, Japan's biggest bank, won approval from the People's Bank of China and the China Banking Regulatory Commission to sell two-year notes, according to a statement posted on Monday on the Chinabond website.
The coupon will be tied to the three-month Shanghai interbank offered rate, or Shibor, the statement said.
"This is very encouraging for foreign bank subsidiaries," said Simon Jin, managing director and head of fixed income in China for UBS AG. Many foreign banks incorporated in the country face a "funding issue because they do not have the vast network around the country, the deposit base".
Bank of Tokyo-Mitsubishi's sale may help expand a corporate bond market that's dwarfed by its government counterpart as the government seeks to wean companies off bank loans. The State and central bank sold 1.6 trillion yuan of securities in the first quarter while companies raised 379 billion yuan from bonds and bills, according to Chinabond and Lianhe Credit Ratings Co.
Bank of China Ltd will manage Bank of Tokyo-Mitsubishi's May 20 sale with help from 12 underwriters including the Industrial and Commercial Bank of China, Agricultural Bank of China and China Merchants Bank, the statement said.
HSBC Holdings Plc and Standard Chartered Plc have said they plan to issue yuan-denominated bonds in Shanghai as the mainland's bond market develops. HSBC sold yuan-denominated bonds through its China unit in Hong Kong last year, becoming the first foreign bank to do so, according to data compiled by Bloomberg.
"We are the first foreigners to sell yuan bonds in the mainland and this will be the benchmark," Noriyuki Tanaka, a manager of corporate planning at Bank of Tokyo-Mitsubishi's China unit, said in a telephone interview. "One billion yuan is the upper limit of our registration. If this deal turns to be successful, we will consider further ones."
Shanghai Brilliance Credit Rating & Investors Service Co rated the Japanese lender AAA, its highest investment grade, Bloomberg data show.
Supranational agencies the Asian Development Bank and International Finance Corp in 2005 sold the first so-called Panda bonds, or yuan-denominated notes issued by foreign entities in China.
The mainland will expand its corporate bond market and encourage banks to trade company debt, China Securities Regulatory Commission head Shang Fulin said in December, after the National Association of Financial Market Institutional Investors said Asian companies may be allowed to start sales.
Five overseas banks have applied to sell yuan-denominated bonds in the mainland, the People's Bank of China said in a report on April 2, without naming them.
Bond sales in the mainland jumped to 1.96 trillion yuan last year from 981 billion yuan as the government urged companies to reduce reliance on bank loans, according to Bloomberg data.