London: Following B.C.’s highly successful issue of a Masala bond into the Indian offshore rupee market in September, B.C.’s Finance Minister Michael de Jong was invited to open trading at the London Stock Exchange today where the bond was listed.
de Jong was in London to celebrate B.C. becoming the first foreign government to issue a bond in the Masala market. He was joined by Alok Sharma MP, Parliamentary Under Secretary of State for the Foreign and Commonwealth Office (Minister for Asia and the Pacific); His Excellency Mr. Dinesh K. Patnaik, Indian High Commissioner to the UK; Nikhil Rathi, CEO, London Stock Exchange; and members of the London financial community, particularly those with connections to India and the Masala bond market.
The Masala bond issue demonstrates the Province’s confidence in the outlook for India, and positions B.C. to participate in internationalization of the rupee and India’s economy. Being the first foreign government to issue a Masala bond, B.C. continues its reputation as an innovator and leader amongst its AAA-rated peers in diversifying sources of funding.
More than US$1.1 billion (INR 7,500 crore or £900 million) of rupee-denominated bonds have been issued in London since July 2016, and London is regarded as the leading global centre for offshore rupee finance.
This celebration comes on the heels of de Jong’s trade trip to India in October, where he met with Honourable Arun Jaitley India’s Minister of Finance, senior government officials, and business leaders. These meetings continued to foster growing relationships and partnerships with India.
India is a priority market for B.C. With the advantages of a young demographic profile, a growing middle class and one of the world’s fastest-growing economies, B.C. is forging and strengthening business, economic and trade relationships with India.
Minister of Finance Michael de Jong said: “From Vancouver to Delhi to London, this bond issuance is unprecedented and remarkable. British Columbia is recognized as an innovator among our triple-A credit rating peers and I am honoured to have the privilege of opening London Stock Exchange on behalf of the Province.”
Nikhil Rathi, CEO, London Stock Exchange said: “We would like to congratulate the leadership shown by the Government of British Columbia in being the world’s first foreign government entity to issue a Masala bond. British Columbia has always led the way in building new markets and we are proud they have chosen to access the widest range of global investors through London, the global centre for Masala bonds. Together we are building an exciting and deep additional channel of finance for Indian infrastructure.”
- A Masala bond is limited for distribution to investors outside of India. It has an INR denominated coupon and pays in U.S. dollars based on the exchange rate prevailing on the coupon and maturity dates.
- Investors from North America, Europe and Asia, bought 56%, 30% and 14% of the Masala bond, respectively.
- B.C.’s three-year-term Masala bond was priced to yield 6.62% semi-annual, and raised 5 billion INR, or about CAD$97.5 million, equivalent.
- Proceeds from the province’s Masala bond were used to purchase a matching 5 billion INR Masala bond from India’s Housing Development Finance Corporation. The investment yields 7.5 % semiannual.
- Net income from the INR investment will be used to support and expand the Province’s trade and investment activities in India.
- Provincial Treasury makes a preliminary estimate of the net income the Province will generate from the matching Masala investment and liability as about CAD$2 million over the life of the bond, after all expenses and assuming today’s foreign exchange rate.
- The Province has used strategic bond issuance before to advance important socio-economic and trade relationships, and to diversify the international investor demand for B.C. bonds.
- The Province was the first foreign government to issue a bond in the ‘offshore’ Renminbi market in 2013 followed by a second issue in 2014. In 2015, the Province became the first sovereign government to establish a Panda bond program in China’s ‘onshore’ Renminbi market. In 2016, the Province issued its first Panda bond under the program.