With banks' help, companies get low-cost funds for fight

A growing number of banks are assisting companies that are part of the battle against the novel coronavirus outbreak in raising money at low cost through issuance of corporate bonds and medium-term notes.

Bank of China Ltd acted as the lead underwriter for Fuyao Glass Industry Group Co Ltd's 600 million yuan ($86 million) medium-term note with a three-year maturity, sold on Friday at a yield of 3.19 percent. The bid-to-cover ratio was 3.72.

Some of the funds raised will be used for the manufacture of auto glasses installed on negative pressure ambulances to fight against the epidemic.

China CITIC Bank Corp Ltd helped China General Technology (Group) Holding Co Ltd, a major State-owned conglomerate specializing in areas including pharmaceuticals, advanced manufacturing and technical consulting, raise 2 billion yuan on Thursday through issuance of 90-day super and short-term commercial paper with a bond coupon rate of 2.4 percent. Out of the total funds raised, 400 million yuan will be used for prevention and control of the epidemic.

"The issuance of anti-epidemic-themed bonds is another way for financial institutions to provide low-cost funds to companies engaged in epidemic control, in addition to loans offered to companies through the re-lending program of the central bank," said Wen Bin, chief researcher with China Minsheng Banking Corp.

At a national teleconference on Feb 9, Liu Guoqiang, vice-governor of the People's Bank of China, said the central bank will issue loans totaling 300 billion yuan to a certain group of banks via its re-lending program, to support banks financing key businesses actively involved in the control of the epidemic, at a preferential rate. As the Ministry of Finance will offer a 50-percent discount, the effective interest rate on the loans that have a maturity of one year will be lower than 1.6 percent.

"Financial institutions will give full play to their advantages of product diversification to inject capital into the real economy and satisfy the demand for funds to address the epidemic. Bond issuance is also an important fundraising channel," Wen said.

Industrial and Commercial Bank of China Ltd, the largest State-owned commercial bank in China by total assets, underwrote 270-day super and short-term commercial paper issued by Jointown Pharmaceutical Group Co Ltd on Feb 11 to raise 1 billion yuan, with a coupon rate of 2.9 percent. Headquartered in Wuhan, capital of Hubei province, Jointown Pharmaceutical Group is a private company directly participating in the battle against the epidemic.

Meantime, some banks also issued their own bonds with the aim of providing emergency funding to control the epidemic.

China Development Bank, a development financial institution, raised 13.5 billion yuan on Feb 6 through the issuance of one-year anti-epidemic-themed bonds at a yield of 1.65 percent.

On the same day, the Export-Import Bank of China, also known as China Eximbank, issued a similar one-year bond worth 3 billion yuan in the interbank bond market at a yield of 1.61 percent, 50 basis points lower than the interest rate of financial bonds of the same maturity.

Xiong Qiyue, a researcher with the Bank of China Research Institute, said: "The issuance of anti-epidemic-themed bonds by a fairly large number of banks has shown the enthusiasm of financial institutions to cope with the epidemic and their willingness to be socially responsible."

This type of bonds have the same purpose as low-interest loans and are mainly subscribed by banks, insurers and asset management companies, he said.