ARX Series 11 May 2023
Non-rating Action Commentary: More Low-tier LGFVs Are Issuing Offshore Bonds, with RMB Issuance Predominating
非评级行动短评：城投离岸债发行主体层级下沉，人民币发行成主流
What's happening in the world of LGFV offshore bonds? Find out now as CSPI Ratings explores latest developments in this article.
Introduction
In the past few years, offshore LGFV bond issuance has shown a generally upward trajectory. In 2021 and 2022, offshore bond issuance by LGFVs experienced high growth rates of 54% and 17.5% respectively, fuelled by favourable offshore issuance conditions and policies. However, in 2023, the scale of offshore issuance has significantly contracted due to a combination of continued interest rate hikes by the Federal Reserve and tighter offshore financing policies. The newly issued LGFV offshore bonds in the first four months of 2023 amounted to approximately USD8.6 billion, with 89 issues, representing a 52.5% decline in issue amount and a 30% decline in the number of issues compared to the previous year. Despite the decline in offshore issuance, the large overall due amount of LGFV bonds in 2023 means that the refinancing pressure on LGFVs remains significant. Additionally, LGFVs face rigorous restrictions on domestic financing. Therefore, we anticipate that LGFVs will continue to have considerable demand for offshore borrowing this year, and that offshore bond issuance will persist at a certain level.
The lower cost of offshore financing has been a primary factor attracting LGFVs to issue offshore bonds over the years. However, since 2022, there has been an inversion in the cost of issuing onshore and offshore bonds for LGFVs. In the first four months of 2023, the average issue yield of offshore LGFV bonds has further increased, with the average issue yield of 1-5 year bonds reaching 5.5%. The spread between the average issue yield of offshore LGFV bonds and that of domestic LGFV bonds in the same period has expanded to 0.8 percentage points. We believe the increase in the average issue yield of offshore LGFV bonds can be attributed to the persistent rise in US interest rates, a substantial increase of RMB-denominated issuance, and the growth in the number of low-tier (low administrative level) LGFV issuers. The overall decline in credit quality among LGFV issuers has pushed up the issue yield of LGFV offshore bonds. Nonetheless, we anticipate that offshore financing costs may ease over the long term as the Federal Reserve's interest rate hike cycle comes to an end, which could result in a return to normalcy in US monetary policy.
概要
2023年城投离岸债发行量同比收缩，平均票面利率持续上升
过去几年，城投离岸债发行量整体呈波动上升趋势。2021-2022年，因境外融资资金面和政策面相对宽松，城投离岸发债热度较高，发行规模同比增速分别为54%和17.5%。然而，2023年受美联储持续加息和监管趋严的影响，城投离岸债发行规模明显收缩。截至2023年4月底，城投离岸债新增发行额折合约86亿美元，共计89笔，发行规模和发行笔数分别同比下降52.5%和30%。但由于2023年城投债整体到期规模较大，有一定借新还旧压力。同时，城投的境内融资持续面临着较强监管。因此，我们认为城投仍存在较大的境外融资需求，预计本年城投离岸债发行仍将维持一定规模。
境外较低的融资成本一直是吸引城投发行离岸债的重要因素，但自2022年起，境内外城投债的融资成本开始出现倒挂。2023年前四个月，城投离岸债平均发行票面利率进一步上升，1-5年期城投债平均票面利率达到5.5%，与同期境内城投债平均票面利率之差拉开至0.8个百分点。我们认为主要原因一方面为美元利率持续走高，人民币发行增多，另一方面是低层级城投发行人大幅增加，发行人整体信用资质的下移推高了城投的离岸债票面利率。但长期来看，随着美联储加息周期结束，美元货币政策有望回归常态，离岸融资成本将有所回落。
Publisher
CSPI Ratings is a Hong Kong-based global credit rating agency. As licensed by the Hong Kong Securities and Futures Commission in 2012, and with a combination of global-grade analytical sophistication and a unique perspective from the emerging world, CSPI Ratings provides globally-benchmarked credit ratings and original credit research to the capital markets around the globe.
CSPI Ratings is a member company of China Securities Credit Investment (‘CSCI’), a leading credit technology service provider in China jointly founded by 35 Chinese financial institutions. CSPI Ratings is also a fully-owned international franchise of CSCI Pengyuan, a leading domestic credit rating agency in China. Between 2012 to 2022, CSPI Ratings operated with the renowned brand of “Pengyuan International”.