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Industrial Bank Issued the First Green Finance Credit Asset-backed Securities in China

- Revitalizing the Credit Funds of RMB 3.5 billion to invest in energy conservation and environmental protection

The first green finance asset-backed securities in China, which had been highly anticipated, was finally issued.

On September 16, 2014, the public bid invitation for the first green finance credit asset-backed securities in China initiated by Industrial Bank (IB), for which Industrial Trust serves as the trustee, “Xing Yuan Second Issue of Green Credit Asset-backed Securities 2014” was accomplished in the national inter-bank debt market. With a total bid amount of RMB 3.318 billion and a total tender amount of RMB 8.296 billion, the multiple hit 2.5. Specifically, the total preferred Level A bid amount hit RMB 6.7 billion, and the multiple was 2.56; the total preferred Level B bid amount hit RMB 1.218 billion, and the multiple was 3.83.

As learnt by the reporter, the basic asset pool for the issue of credit asset-backed securities was green finance based loans of IB completely. With the issue amount reaching RMB 3.494 billion, the securities were divided into three types: preferred Level A asset backed, preferred Level B asset backed and secondary asset backed. Specifically, the issue amount of preferred Level A reached RMB 2.76 billion, with a rating of AAA, a weighted average term of 0.69 year, and an offering rate of 5.1%. The issue amount of preferred Level B reached RMB 335 million, with a rating of AA/A+, a weighted average term of 1.88 years, and an offering rate of 5.89%. The issue amount of secondary level reached RMB 399 million, with a weighted average term of 2.07 years.

The 48 basic assets all excellent and “green”

As disclosed in the issue prospectus, the basic asset pool for the issue of credit asset-backed securities comprised 48 corporate loan assets of 38 borrowers, and all of them were high-quality loans selected strictly from the normal loans of IB and green finance based loans recognized by the bank.

General Manager Dai Xiaoyuan of the Investment Banking Department of IB introduced, “selecting green finance based loans as the basic assets further showcases the energy conservation, emission reduction and Equator Principles advocated long by our bank. Meanwhile, the asset securitization can accelerate our transformation of business model and establish a long acting mechanism for the improvement of credit asset structure. The asset securitization in this issue enables the two to reach a tallying point in terms of ‘implementation and practice of sustainability concept’".

The above concept has been put into the product. The basic asset pool is composed of corporate loans of 16 branches, and the basic assets are distributed evenly in 16 industries including power and heat production, ecological protection and environmental control, featuring a high regional and industrial dispersibility.

As revealed in the issue prospectus, the basic assets of this issue of credit asset-backed securities including both credit and guarantee based loans. There are 15 pooled credit loans, which account for 31.25% of the total number of basic assets, and the balance of credit loans hits RMB 1.593 billion, which account for 45.59% of the balance of basic asset loan. There are 33 pooled guarantee loans, which account for 68.75% of the total number of basic assets, and the balance of guarantee loans hits RMB 1.901.18 billion, which account for 54.41% of the balance of basic asset loan.

It is learnt that IB introduces some mortgaged and pledged loan in an unprecedented manner. This act will further reduce the risk of default loss and further protect the security of funds of investors. Currently, it is the first case among all joint-stock commercial banks and urban commercial banks.

The green credit of RMB 3.5 billion revitalized

The successful offering for this asset securitization project will enable IB to release a green credit scale of RMB 3.5 billion, to be reinvested in key areas of energy conservation and environmental protection, which are represented by utilization and protection of water resources. The environmental benefits brought by the project are also considerable. It is estimated that the project can save 360,000 tons of coal equivalents within China each year, reduce 1.06 million tons of carbon dioxide annually, which are equivalent to the total amount of carbon dioxide absorbed by 110,000 hectares of forest a year, and save 3.94 million tons of water annually.

“It is an event of milestone in the course of green finance development of IB!” Upon mentioning this project of green finance credit assets securitization, General Manger Liang Pingrui of the Environment Finance Department of IB said gladly, “the project not only fully showcases the active efforts of our bank in making innovation in the channels of asset-liabilities management and revitalization of credit assets in stock, but demonstrates the resolution and commitment of our bank, as the first Equator bank in China, in practicing the concept of sustainability, implementing the spirit of the ‘Conference of Chinese Banking Industry on Settlement of Excessive Capacities and Practice of Green Credit’ held last year, and accelerating the development of green finance".  

As the leading bank of green finance in China, IB has introduced International Finance Corporation (IFC) as a strategic investor and carried out cooperation in the area of sustainable finance as from the end of 2003. In 2006, the bank released the first national green credit product –China Utility-Based Energy Efficiency Finance Program (CHUEE).  With years of development, IB has kept making innovation and integrating products including energy efficiency financing and emission right finance, gradually building a system of green financial products and services which includes ten general-purpose products, seven characteristic products, five financing models and seven kinds of solutions. Besides the ten general-purpose products including green project financing, green buyer credit and green financial lease, the system also includes seven characteristic products such as financing for energy performance contracting (EPC), contract environmental service based financing and carbon assets pledge based financing, provides five service models such as financing for the production increase of energy-conserving and emission-reducing equipment manufacturer, financing for utilities service supplier and financing for franchised projects, and provides seven integrated solutions covering carbon trading, emission right trading, conserved energy trading, etc.

As indicated by relevant data, by the end of June 2014, the financing balance of green finance of IB hit RMB 226.8 billion, and the supported projects could save 23.52 million tons of standard coal across the country each year, reduced 68.80 million tons of carbon dioxide, and saved 262.29 million tons of water, equivalent to stopping running 100,000 taxis for 33 years.