The Agricultural Bank of China (ABC) has raised 50 billion yuan (US$7.3 billion) in a corporate bond sale, the bank revealed in a statement yesterday. It is the largest such deal so far in China.

According to ABC, 20 billion yuan was raised in the interbank market by selling a 10-year callable bond at a coupon rate of 3.3 percent for the first five years. Another 25 billion yuan was raised via 15-year bond at a coupon rate of 4 percent for the first 10 years. The remaining 5 billion yuan was raised through a floating-rate bond with a rate set at 0.6 percentage points higher than the benchmark one-year deposit rate.

The sale started on May 18 and ended on May 21. An industry insider revealed that large banks and insurance companies were all enthusiastic about the sale.

The 50 billion yuan will be used to increase the bank's supplementary capital, so as to enhance its operational strength and reduce its risk exposure, ABC authorities said.

However, a source close to the bank revealed that the bond sale was also a part of ABC's share listing plan.

Currently, capital is adequate in the interbank market and the rates in the currency market are low. The two conditions combined have resulted in relatively low fund raising costs. The money ABC raised is expected to boost the bank's capital adequacy ratio to 10 percent. Issuing corporate bonds is a major part of ABC's financial restructuring program.

(China.org.cn by Chen Xia, May 21, 2009)