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National Bank of Canada Launches First North American Panda Bond Sale

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National Bank of Canada (NBC) made North American history on Friday, as it became the first banking institution in the continent to issue panda bonds. The bank made available 3.5 billion yuan ($517.7 million), following the approval of its 5-billion-yuan bond program by the Chinese government in September. Yuan-denominated bonds sold by foreigners, called panda bonds, have been available since 2005, but Canadian businesses had little use for them at the time. Given the growing partnership with Chinese firms in Canada and the opening up of China to foreign business owners, NBC believed this would be an opportune time to make the funds available. NBC revealed that the three-year bond was supplied by China Merchants Securities, Standard Chartered Bank (China) Limited, Agricultural Bank of China Limited, Industrial and Commercial Bank of China Limited and Bank of China, at a coupon of 3.05 percent.

“Panda Bonds represent a new diversified funding source and will help us in supporting Canadian companies doing business in China and bilateral investment flows,” said Denis Girouard, executive vice-president at NBC. It is uncertain if panda bonds would ever become a stable product in international debt capital markets, but its performance is expected to keep increasing. “At this stage, panda bonds will not become mainstream quickly like the yankee bonds or the samurai bonds,” said Steve Wang, head of research at BOCI. “International companies with operation exposures to the Chinese market will continue to issue panda bonds opportunistically but that is a moving target.” He also added that “The approval process is not as flexible as they like, paperwork, including the accounting standard applied, is complicated and there are hurdles to move funds across borders – Panda bonds will take time to develop into a significant market segment in the international bond market.”

NBC is Canada’s sixth largest bank, with a lender rating of A-plus from international rating agency Fitch, and a AAA rating from China Chengxin International Credit Rating.


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