JunZeJun has advised Bank of China on the establishment of its US$5bn China Covered Note Programme and the initial offering by Bank of China London Branch of US$500m China Green Covered Bonds due 2019 (the “Notes”).

 

The Notes will be secured on a portfolio of PRC domestic climate aligned bonds held by Bank of China. This is a landmark transaction since it is the first international note issue by a Chinese entity that is secured by onshore assets, and  in this case, an international green bond issue secured by green bonds that are traded on the China interbank bond market.

 

JunZeJun set up the legal structure with respect to the security and enforcement in the PRC and arranged China Central Depository & Clearing Co., Ltd. (“CCDC”) as the Asset Monitor and Enforcement Agent of this transaction. Prior to this transaction, no self-help remedy was available in relation to enforcement of pledged bonds that are deposited with CCDC, whilst in this offering we have seen CCDC adopt a pre-authorisation approach for the first time to allow the pledgee to enforce the pledge on an expedited basis.

 

As a result of the credit enhancement, Bank of China will be able to achieve a rating uplift to Aa3 by Moody’s, which is the sovereign rating of China, one notch higher than Bank of China's own credit rating of A1. This is the first time that Moody’s grants Bank of China a credit rating equal to the sovereign rating of China.

 

JunZeJun has a wealth of experience in international note issue by Chinese financial institutions, previously advising on several USD and RMB note issues by oversea branches of Bank of China, including the first international green bond issues by Bank of China New York Branch and Bank of China Luxembourger Branch in June 2016. 

 

The JunZeJun team advising Bank of China was led by Partner Yunbo Li, and team members include Partner Xueyan Hu, Associate Jay Song.