New Silk Road Finance Awards 2019: South Asia
Best Chinese Bank in the region for BRI: Bank of China
Bank of China (BOC) has been at the forefront of BRI projects in south Asia, and a regional pioneer among mainland banks. Over the last three years, it has pitched for these awards several times, relying on its presence in a host of deals such as the 10-year, $700 million syndicated term loan raised for Pakistan’s finance ministry in December 2017. BOC was a key player in that deal, which secured partial guarantees from the World Bank.
This year it has shone across the region, arranging deals in Pakistan and Bangladesh – the latter sovereign a relative latecomer to the BRI party, despite being China’s third-largest regional trading partner. In December 2018, Bank of China secured a mandate as lead arranger, lender, swap bank and correspondent bank on a $1.78 billion syndicated loan to fund a coal-fired power station that will be built in Bangladesh by Chittagong-based S. Alam Group.
BOC is also acting as correspondent bank on a deal in which it is providing swap services to a project central to Bangladesh’s long-term ability to generate enough electricity to power the fast-growing nation.
That project is large and complex, and emblematic of China’s desire to both build and fund critical power and transport infrastructure in BRI countries. It is being funded by BOC and an array of other mainland lenders, including China Development Bank, and built by Sepco Electric Power Construction Corporation.
It marks the first time Sepco has invested in a greenfield power project outside China: the state-run engineering firm, based in the city of Jinan, will own a 30% stake in the new power plant, with the remainder controlled by the local conglomerate. Dhaka is providing financial guarantees on the power purchase agreement, which will run for 25 years.
Best international bank in the region for BRI: Standard Chartered
Standard Chartered spotted the benefits of China’s Belt and Road Initiative from the start. With 160 years of experience in China and 150 years of history in south Asia – where it is present in India, Bangladesh, Nepal, Pakistan and Sri Lanka, with 250 branches and 14,000 employees – StanChart saw from the outset that it and the BRI were a natural fit.
|Judy Hsu, Standard Chartered
During 2018, it was involved in about 100 BRI projects, 30% of which were located in south Asia. Over the course of the year, it signed memoranda of understanding with China Development Bank and, at the annual BRI forum in Beijing in April 2019, with Export-Import Bank of China and China Export & Credit Insurance Corporation (Sinosure), both of which are increasingly active across the region.
StanChart’s strength in Pakistan, China’s chief regional political and economic ally, has enabled it to play an important role in a slew of BRI-related deals over the last six years.
As Beijing’s focus expanded over the last two years to encompass other fast-growing countries in the region, notably Nepal and Bangladesh, StanChart had a strong advantage, thanks to its unparalleled presence in those countries under Bharat Padmanabhan, its regional head of global banking for Asean and south Asia.
In Nepal, it organized a China Day event in April 2019, hosting mainland infrastructure, construction and hotel groups to help explain the BRI to investors, government officials and corporates.
In Bangladesh, the UK lender is working on some of the largest infrastructure deals ever struck by a pro-business government that is keen to lift growth rates and improve economic and financial ties with Beijing.
In August 2018, StanChart opened a project account for China Railway Group, which has been mandated to build a $3.7 billion road-and-rail bridge spanning the Ganges river in Bangladesh. It is providing a full range of inbound and cross-border services, including deposits, payments and foreign exchange, to the state-run group, whose shares are listed in Hong Kong and Shanghai.
Best local bank in the region for BRI: HBL
Few lenders were quicker to spot the benefits of China’s Belt and Road Initiative than Habib Bank Ltd. Over the last decade, HBL has been Beijing’s go-to financial partner in Pakistan, and a vital player in its efforts to draw south Asia tightly into its economic and financial orbit.
|Muhammad Aurangzeb, HBL
It matters that HBL has heft at home. It is Pakistan’s largest lender, with 1,700 branches, and its most outward-looking, with branches in more than 20 countries. Its relationship in and with China is not new: HBL opened its first branch in the People’s Republic in 2005. The launch of the BRI in 2013 coincided with the rollout by HBL of three onshore China coverage desks, in Karachi, Lahore and Islamabad, as well as a coverage team located in the Chinese-controlled Gwadar Port free trade zone, opposite the coast of Oman.
The first branch the bank opened in China was in Urumqi, the largest city in the west of the country, in October 2018, and it kicked off its renminbi business in August 2019, the same month it filed with the China Banking and Insurance Regulatory Commission to upgrade its Beijing representative office to full branch status.
HBL’s value to China is underlined by the fact that it is the only financial institution granted membership bank status by the Shanghai Cooperation Organisation’s Interbank Association.
If anything, HBL has doubled down over the last year on its commitment to Asia’s largest economy. It was the lead sponsor of the Gwadar Expo 2019 and hosted a conference on the internationalization of the renminbi. Its president and chief executive, Muhammad Aurangzeb, was a keynote speaker at ICBC’s Belt and Road Bankers Roundtable in May 2019.
Then there’s the usual roster of deals, led by Thar Energy’s $520 million coal-based power plant, signed in December 2018. HBL was exclusive financial adviser and local-currency-mandated lead arranger on a transaction that blended local and foreign currency debt, and included backing from China Development Bank.
The bank was also exclusive financial adviser and local- and foreign-currency-mandated lead arranger on a $230 million cement plant for local operator Saif Cement that was part-financed by China Development Bank; in addition, it was the financial adviser to a $1.66 billion high-voltage power transmission line linking Matiari with Lahore, to be built by a unit of the State Grid Corporation, China Electric Power Equipment and Technology.
Best bank for BRI-related financing in the region: Standard Chartered
In essence, the BRI is little more than a big and ambitious country’s outward-facing trade policy, which happens to hit more Asian economies than it misses. Each year it grows and matures. Perhaps the key BRI change over the last year has been India’s tentative embrace of the project. Standard Chartered’s pitch for this award is evidence of India’s wary but undeniable acceptance that the BRI is a long-term reality that it can no longer afford to ignore.
Over the last year, the UK lender has quietly forged a host of Sino-Indian commercial and trade deals, many of which have the ring of the BRI about them.
Take the bank’s support for LNV, a division of Beijing-based engineering firm Sinoma International, which is building its largest renewable energy plant in south Asia’s largest economy. StanChart is providing, among other things, letters of credit, as well as payments and collections. In September 2018, it created a custom-made solution to support Guangdong-based BBK Electronics, maker of Oppo- and Vivo-branded smartphones, helping it to simplify cross-border import payments.
StanChart has been busy in Dhaka too, using its strength in Bangladesh to provide a comprehensive, one-stop solution, plus a sub-account structure, to China Railway Group, which is building a $3.7 billion road-and-rail bridge over the Ganges river. StanChart is providing a complete range of inbound and cross-border services, including deposits, payments and foreign exchange.
It is hard to find many parts of south Asia where StanChart is not working hard to connect mainland capital and companies with local and regional projects. In Kathmandu, it organized a China Day event in April 2019 to showcase and explain BRI. And it is evident in Colombo, where it arranged, in July 2018, a $400 million bilateral facility for China Merchants Port, to fund the acquisition of a multi-purpose facility in the south of the island.
Best bank for infrastructure/project finance in the region: HSBC
Many international banks start pitches for awards by extolling their unrivalled understanding of local markets. HSBC is one of the few that lives up to the boast. Across south Asia, it had a leading role in a slew of BRI deals. In Sri Lanka, it acted as sole mandated lead arranger, lender and agent on a $72 million, Sinosure-supported facility to finance the upgrading of hospitals in Sri Lanka.
The buyer credit facility was signed by the ministry of health and the international division of China Electronics Technology Group Corporation in March 2019. It marks the third Sinosure-backed facility arranged by HSBC with the Sri Lankan government in as many years.
HSBC was also involved in several Sino-Indian deals, again underscoring the slow filtration of the BRI into India’s commercial and financial spheres. HSBC provided ICBC Leasing, a division of Industrial and Commercial Bank of China, with a $240 million portfolio financing facility, to support the leasing of six Boeing 737 aircraft to two low-cost Indian carriers, SpiceJet and Air India Express. The British lender also acted as sole financial adviser to Xtep’s $260 million acquisition of K-Swiss owner E-Land Footwear USA Holdings in May 2019.
The Hong Kong-listed brand owns more than 6,200 stores, and is one of the fastest-growing vendors of sportswear in India.
The bank’s clout across the region was underscored when one of China’s largest investment holding groups, SDIC, bought a 28% stake in Arab Potash, the world’s eighth-largest potash producer, in July 2018 from Canadian fertilizer company Nutrien. HSBC was sole financial adviser to SDIC Mining Corporation, a subsidiary of the group, working with China’s commerce ministry and India’s competition commission to secure approval and ensure the deal went ahead without a hitch.
Best individual BRI project or initiative in the region: Thar Energy 330MW Lignite Coal Power Plant
Thar Energy lignite coal power plant, Pakistan (Habib Bank Limited)
Chances are, when you stumble upon a sizeable China-backed deal to invest in infrastructure in Pakistan, Habib Bank Ltd is involved. The Karachi-based financial institution, Pakistan’s largest lender by assets, wins plaudits and prizes this year, courtesy of a $520 million lignite coal-based power project in Sindh province. The deal was signed in December 2018 and the project will be built by Thar Energy, a consortium run by chief executive Saleemullah Memon, and comprising Hub Power Company, which owns 60% of the plant, local chemicals firm Fauji Fertiliser and China Machinery & Engineering Corporation.
|Saleemullah Memon, Thar Energy
The plant will be fuelled by local lignite coal, and will supply power to the national grid under a 30-year power purchase agreement. It is set to start operations in 2021, providing electricity to 600,000 Pakistani households, and reducing dependence on foreign fuel.
HBL was central to getting the project funded and approved, acting as exclusive financial adviser and local-currency-mandated lead arranger on a deal that involves a blend of local and foreign currency debt – the latter provided by China Development Bank – along with credit enhancement from Sinosure.
To mitigate risk, it structured a credit-enhanced guarantee that shelters the portion of commercial risk not covered by Sinosure, China’s top export insurance provider. HBL acted as inter-creditor agent and security trustee, advised on the capital structure and worked within a limited timeframe with the State Bank of Pakistan to get approval for the sizeable capital commitment. It led the arrangement process on the local currency tranche, worth PRs36.5 billion ($230 million).