Fangda Partners represented the Arab Republic of Egypt (“Egypt”) in its issuance of the three-year Renminbi-denominated sustainable development bonds in an aggregate principal amount of RMB3.5 billion (the “Bonds”). The deal was successfully closed on 17 October 2023 and recorded the largest ever issuance among sovereign panda bond offerings. This deal has an innovative transaction structure – two multilateral development banks rated AAA by international rating agencies, the Asian Infrastructure Investment Bank and the African Development Bank, provide unconditional and irrevocable guarantee for the full payment of the principal of and interest on the Bonds, making it the first sovereign panda bond offering guaranteed by multilateral development institutions.
 
This deal marks an important milestone in the opening up of China’s debt capital markets and a new chapter on the panda bond market with its impressive array of “firsts”:

• The first panda bonds issued by an African issuer
• The first sustainable development sovereign panda bonds
• The first sovereign panda bonds under a guarantee structure

The Bonds are offered through private placement on China’s national interbank bond market to qualified institutional investors, with a coupon rate of 3.51%. The net proceeds from the offering of the Bonds will be used in accordance with Egypt’s Sovereign Sustainable Financing Framework (November 2022) earmarked for eligible sustainable expenditures.

This offering, as a landmark financing transaction under the green “Belt and Road” initiative, manifests the achievements of the cooperation between China and Egypt in the areas of sustainable development and debt capital markets. It is expected to propel the joint efforts of China and Egypt as well as Africa at large to build up the “Belt and Road” connections and promote the expanded use of the Renminbi in Egypt.

The transaction presented significant challenges due to its innovative structure, numerous parties involved and the unique features brought by a sovereign as issuer and multilateral development banks as guarantors. Leveraging their extensive experience in advising panda bond offerings by sovereign, supranational and agency issuers, Fangda team provided in-depth PRC legal advice on the guarantee structure, the documentation requirements and other aspects of the transaction as the sole PRC legal counsel during the early stage of deal preparation. After the working group proceeded into the deal execution stage, Fangda team drafted the key transaction documents in English and Chinese and advised the issuer on various aspects relating to the Bonds under PRC law, including, among other things, on program registration, bonds offering and ongoing obligations. Fangda received ample compliments from the client. Fangda team was led by partner Christine Chen, and the team members included counsel Helen Zhao and associates Helen Wang, Howie Jiang, Roselyn Li and Mengyang Wang.