China State Shipbuilding Corp (CSSC) has raised CNY 5bn ($717m) selling the so-called “coronavirus bonds” in the domestic market.
The deal sees it join other state-owned enterprises in their fund-raising drive as the Covid-19 outbreak hits their businesses hard.
In a web statement, the Chinese shipbuilding conglomerate boasted this issue, underwritten by Bank of Shanghai and Industrial and Commercial Bank of China (ICBC) at end-February, was the largest of its kind.
“The money is being used to replenish the working capital of group firms who need the funds to help contain the virus outbreak. It will also be used to help group firms ramp up their utilisation rates,” CSSC said.
Several CSSC outfits based in Wuhan, the central Chinese city at the epicentre of the epidemic, have been involved in virus-control tasks including constructing two hospitals.
With a maturity period of 270 days, the CSSC bonds are fixed at a coupon rate of 2.2%.
The bond sale came in parallel with similar financing efforts by Cosco Shipping Holdings, the container arm of state giant China Cosco Shipping, and China Merchants Ports.
Cosco Shipping Holdings said it sold CNY 1bn coronavirus bonds that will mature in 180 days. Underwritten by ICBC and Bank of Communications, the issue achieved a coupon rate of 1.82%.
Separately, China Merchants Ports, part of state-owned China Merchants Group, raised CNY 700m via selling 266-day bonds at a coupon rate of 2.5%.
China Merchants Bank and Bank of China underwrote the sale.
Since early February, Chinese authorities have been promoting the ”coronavirus bonds” – which are effectively commercial papers – among domestic investors, allowing the issuers to meet short-term capital needs via a fast-track approval process.
While the interest rates are determined by Chinese investors, Chinese media reported companies often managed to enjoy low financing costs as those issues tend to be underwritten by state-run banks and backed by companies with strong credit profiles.
The Beijing News reported a total of 277 tranches of bonds were sold to raise CNY 237bn as of Sunday, with the banking and transport industries leading the drive.
The bond sellers have to spend at least 10% of the funds raised from such sales in containment measures for the outbreak, but it is not certain how Chinese regulators will monitor whether this requirement is met.
