Linklaters advises on the first international exchangeable bond which is exchangeable into Hong Kong listed H-shares

Linklaters has advised the underwriters in connection with Baosteel Group’s issuance of a US$500 million bond exchangeable into Hong Kong listed H-shares of China Construction Bank Corporation.

Hwang Hwa Sim, Capital Markets partner at Linklaters who led on this transaction, said the deal opens up a new asset class for investors and has created pricing visibility for future equity linked deals from the 200-plus China incorporated companies whose H-shares are listed on the Hong Kong stock exchange.

“This deal is a worldwide first for a new asset class, providing a structure which allows China incorporated companies to monetise their holdings of H-shares at a premium”, Mr Sim said.

“This is the first time that a bond linked to H-shares has been sold in the international capital markets. In order to get there, we had to put in place an innovative structure, which has resulted in a number of firsts for this deal. 

Linklaters Capital Markets partner Andrew Carmichael, who jointly led the transaction with Mr Sim said the deal was the first significant equity-linked instrument in Asia to use a keepwell structure – a rare technique in the convertible bonds and exchangeable bonds market.

The complex deal also achieved a series of other firsts, namely -- the first equity-linked deal with underlying shares in a Chinese bank, the first equity-linked transaction since the new NDRC Rules in China came out in September 2015 and the first offshore equity-linked issue from Baosteel Group.

The Baosteel Group is one of the largest steel producers in the world, and Linklaters was pleased to advise on this innovative, multi-jurisdictional and extremely successful deal by the Baosteel Group.

The Linklaters team was led by Hwang Hwa Sim and Andrew Carmichael, with assistance from managing associate Hanwen Yu, associate Jane Ng and PRC adviser Libin Shi.  

“We’re delighted to have achieved such as positive outcome on the deal for the underwriters and Baosteel Group, and we think this will herald a new market segment in the international capital markets,” Mr Sim said.

For more information please contact Nicholas Davy.