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King & Wood Mallesons advises Xinhu Zhongbao on China’s first and largest high yield bond issuance since January 2013

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By King & Wood Mallesons

King & Wood Mallesons (KWM) has advised  Xinhu (BVI) Holding Company Limited as its US and PRC counsel on its US$700 million 6.00% guaranteed senior notes issuance due 2020, which is guaranteed by Xinhu Zhongbao Co., Ltd (Xinhu Zhongbao). The transaction marks the largest initial issuance of a high yield bond by a PRC company since January 2013, according to the Bloomberg database.

With a capitalization of about 40 billion yuan, Xinhu Zhongbao is ranked at the top of the listed companies in Zhejiang Province, and is the index constituent stocks of “CSI 300” and “SSE 180”. The issuance attracted nearly 200 bookkeeping institutions, and received more than 7 times over subscription from Goldman Sachs, BlackRock, Blue Bay and other well-known international institutions, reflecting the international market’s high recognition for Xinhu Zhongbao’s credit and excellent performance. The transaction structure and the terms of issuance have also achieved an innovative breakthrough after several rounds of negotiations.

The KWM US team based in Hong Kong was led by partner Zhou Hao, supported by senior associates Annie Shen and David Liao. The KWM PRC team was led by partner Zhang Yongliang, Jiang Yifeng and Huang Renzhong, with great support from partners Song Yanyan and Mu Peng.

Partner Zhang Yongliang said, “We are pleased to work with our Hong Kong team to assist Xinhu Zhongbao in the landmark issuance. Xinhu Zhongbao is one of KWM’s long-term important clients. The issuance has once again demonstrated the advantages and achievements of KWM’s global strategic layout.  Under the overall tightened regulatory environment, KWM’s cross-border team collaborated to assist our client with the overseas issuance of the USD-denominated bonds by our wealth of experience and first-class legal services, and has been highly praised by the client.”

Commenting on the deal, Hong Kong-based partner Zhou Hao said, “We are delighted to have supported our client with this record breaking transaction. It is widely anticipated that high-yield bond issuance will surge in 2017. Statistics show that the total deal volume for high-yield bond issuance in Asia (excluding Australasia and Japan) has amounted to US$9.56 billion as of 13 February – the strongest start to any year since 2000.”

KWM’s international DCM team has advised on 16 high-yield bond issuances since 2015, all of which were by first time issuers. “All high yield practitioners know that debut issuances require tremendous expertise, resources and commitment. With a proven track record, our team continues to be busy with a strong pipeline in this space.” Hao Zhou said.