The Asian Development Bank (ADB) on Tuesday announced that it will issue its second renminbi- denominated "Panda" bonds in the domestic capital market of China.

The issue will have a principal amount of CNY 1 billion, a bullet maturity of 10 years, and a fixed coupon rate payable annually, ADB said in news release.

ADB and lead manager China International Capital Corporation Limited (CICC) have conducted road shows in Shanghai and Beijing. Book building will be done on Dec. 4 and pricing will take place no later than close of business on the same day.

The Panda bonds will be issued in the national interbank market with clearing and settlement through the China Government Securities Depository Trust and Clearing Co., Ltd.

ADB will use the proceeds of the Panda bonds in China to fund private sector clean energy and energy efficiency projects. The objective is to help reduce the currency risk and provide long- term RMB financing for private enterprises.

"ADB is pleased to return to the PRC bond market after ADB's inaugural Panda bond issuance in 2005," said Bindu Lohani, ADB's Vice-President of Finance and Administration. "ADB is privileged to continue to contribute to the further development of the bond and derivatives markets in China."

As with the first bond issue in China, ADB will execute interest rate swap transactions in relation to the issuance of Panda bonds, the bank said.

"Additionally, ADB will be able to provide long-term local currency financing to private sector and non-sovereign borrowers in the PRC through this bond issuance," said Lohani.

The Panda bonds will provide investors with an excellent opportunity to diversify and strengthen their portfolios with the highest credit-quality securities and longer-dated instruments.

"The 10-year tenor of the Panda bonds will match the need of institutional investors for longer-dated, high-quality assets. Also, the bonds will contribute to the development of yield curve and establishment of pricing benchmarks for use by local issuers," said Mikio Kashiwagi, ADB's Treasurer.

The launch of the Panda bonds is another landmark in ADB's mission to contribute to the development of regional bond markets, the bank said.