All ready, or almost for the Italian Panda bonds. The name chosen (and the reason for the choice will be understood shortly) will make many investors smile, but in reality it is a very serious matter. We are talking about bonds issued by Cassa Depositi e Prestiti which will make Italy the first G7 country to issue securities denominated in Renminbi (Beijing's currency) and placed with Chinese investors.
"The panda bonds that will be issued in a few days they will be 150 million per hour”, announced the Minister of Economy, Giovanni Tria on 10 July, on the sidelines of the First China-Italy Dialogue. “All that is needed is a signature to complete the issuing procedure. They will be bonds to finance businesses”, explained the owner of via XX Settembre. In fact, to officially start the issue, we have to wait for the approval of the People's Bank of China, but given the certainty shown by Tria, the authorization should be upon us.
PANDA BOND: WHAT THEY ARE
Let's start right from “original” name chosen for these bonds. As explained by the consulting firm EY2, the denomination is due to an international custom according to which the issues of bonds in local currency by foreign issuers are called with the name of the mascot of the country in which the bond is issued and placed. Needless to say what is one of the symbols of Beijing.
The first Panda bond issue dates back to 2005, when International Finance Corporation , Asian Development Bank, placed bonds worth 4 billion renminbi. Over the years the market has developed and at the end of 2017 the total amount of Panda Bonds issued on the China Interbank Bond Market exceeded 123,4 billion yuan.
In Italy there was already talk of the Panda bond last March (after the signing of a memorandum of understanding between the Cdp and the Bank of China on August 28), when Italy, not without controversy from other European countries and the USA , has officially entered the Silk Road, all-round infrastructure investment plan concerning ports, railways, energy, roads, telecommunications, etc. launched from China almost 6 years ago.
At that juncture, Cassa depositi e prestiti and Bank of China Limited signed a collaboration agreement aimed at supporting the growth of Italian companies in China. Among the various support instruments, the agreement envisaged a co-financing program for Italian companies investing in China of 4 billion Renminbi and the issue of bonds, called Panda Bonds, worth 5 billion Renminbi, equal to 650 million euros.
PANDA BOND: TOWARDS THE FIRST ISSUE
The first issuance of panda bonds, as specified by Tria, will be equal to 150 million euros out of a total of 650 million (5 billion yuan).
These titles will be intended for institutional investors operating in China – such as insurance or pension funds – and the proceeds raised will be used to finance branches or subsidiaries of Italian companies based in Beijing.
“In CDP we have approx 60 Italian companies operating in China in which we have a direct or indirect stake and which generate 3,5 billion in turnover. Cdp is ready to make an important qualitative leap with China. We want to create more structured financial support for Italian companies in China to address the growing demand for Made in Italy. Because of this we will launch Panda bonds that will finance SMEs in China. We are awaiting the ok for the issue but there are already expressions of interest", announced Fabrizio Palermo, CEO of Cdp, adding that "we have also initiated contacts with Chinese funds and we want to support the entry and expansion plan of our subsidiaries in China. I am thinking of Snam and Ansaldo Energia”.
