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ChemChina issues 1st SHIBOR-based bonds

(Shanghai Daily)
Updated: 2007-04-19 13:59

China National Chemical Corp (ChemChina) said yesterday it has become the country's first company to issue bonds based on the new interbank benchmark rates for borrowing that were introduced early this year.

The company yesterday started to sell the 10-year bonds, which have an annual coupon of 4.28 percent, to raise 1.5 billion yuan (US$194 million), it said in a statement on the website of the National Debt Association of China.

The interest rate was calculated by adding 107 basis points to the average one-year Shanghai interbank offered rates, or SHIBOR, in the five trading days before yesterday, according to the statement.

The sales period will end on Tuesday.

The bonds, rated AAA, will pay interest once a year, the statement said.

ChemChina will use the proceeds in four petrochemical projects to expand capacity, according to the statement. China Development Bank is the lead underwriter for the bond sale.

China in January introduced the SHIBOR, which are set by lenders making bids for borrowing and cover maturities from overnight to one year.

Under the arrangement, SHIBOR are modeled on the London interbank offered rates to serve as a reference interest rate for issuers of bonds and loans.

The People's Bank of China introduced the China interbank offered rate, or CHIBOR, a decade ago, which, unlike SHIBOR, are derived from actual traded rates on interbank deals.

As the trading volume of interbank funding activities is thin, the CHIBOR system has largely been ignored.

The central bank is striving to encourage the use of SHIBOR by engaging the benchmark in deals including money market operations and interest rate swaps.