Awards for Excellence 2018
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Also shortlisted |
Barclays |
Citi |
Lazard |
When it comes to the big themes in the public sector over the last 12 months – Saudi Arabia’s Vision 2030, China’s Belt and Road Initiative, the booming green finance market and the effects of rising rates and an appreciating dollar on sovereign borrowers – HSBC seems to be right in the middle of it all. More importantly, the bank is connecting the dots.
Take Egypt. The bank has played an important part in the country’s economic comeback since the IMF granted it a three-year $12 billion extended funding facility in 2016. In November 2017, having already helped the central bank fill a $6 billion funding gap identified by the IMF with a $2 billion reverse repo the year before, the bank once again helped the Central Bank of Egypt boost foreign currency reserves with a second, $3.1 billion reverse repo. HSBC also arranged a private placement of bonds issued by the ministry of finance to the central bank and lead the sovereign’s $2.5 billion dual-tranche bond in February this year.
But it doesn’t stop with financing. The bank signed a memorandum of understanding with the ministry of investment and international cooperation in October to boost foreign direct investment in the country. When China Electric Equipment & Technology approached the Egyptian government to build overhead power lines, HSBC’s Egyptian and Chinese operations issued advance payment and performance guarantees of $115 million.
“It goes beyond arranging a landmark deal and looking at how we finance it,” says Allegra Berman, who heads HSBC’s public sector group alongside Gareth Thomas and Michael Ellam. “It’s looking at ECAs [export credit agencies], multijurisdictional solutions and more.”
HSBC, which last year became the first international bank to have a majority ownership of a securities joint venture in China, has arguably become the best-placed bank to facilitate FDI from China into the 80 markets it covers in public sector. The bank was one of the first handful to complete trades on Bond Connect in July 2017, the programme allowing foreign investors access to the more than $9 trillion market in onshore Chinese interbank debt. In the same month, HSBC, alongside Bank of China, led the Republic of Hungary’s panda bond – the first sovereign panda bond marketed on Bond Connect.
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| Allegra Berman |
“Because of the investment HSBC has made, in China in particular, we can advise clients on everything from financing to payments to custody – we’re a one-stop shop,” says Berman.
In Saudi Arabia, where the sovereign’s Vision 2030 aims to completely overhaul the country’s economy, HSBC is the largest international broker, with a 13% market share, has been on every sovereign bond to date and is the only bank to have had an active role in every one of its issues.
The bank is among the sovereign’s advisers for Vision 2030 projects and has actively supported the development of primary dealerships. That is something Thomas thinks will trend in the next 12 months as other Middle Eastern countries look to develop their domestic capital markets.
“Our activity goes well beyond the transactions,” he says. “We’ve made a difference in enabling significant reforms in some of these countries. We’ve got a long-term commitment to their economies and markets.”
Last year was one in which some emerging and frontier markets found themselves overexposed to US dollar-denominated debt as the dollar strengthened. HSBC, as well as short-listed bank Citi, has been among the leaders in helping sovereigns, supranationals and agencies engage in liability management exercises, like the accelerated one-day switch that it pioneered in 2012 and last year continued to dominate, and Greece’s exchange of 20 private-sector involvement (PSI) notes into five vanilla benchmark bonds.
“In the awards period, we’ve been lead manager on seven of the 13 public-sector liability management exercises that have included a new issue,” says Hector Snuggs, director, public sector DCM. “In Greece, there was the PSI notes exchange offer, for example. There are a lot of different routes we can take to help SSAs optimize their debt profiles.”
And of course, there is the green bond market, which could hit a total of $250 billion this year, according to the Climate Bonds Initiative. The bank has held active and lead roles on various landmark bonds, like that issued by the City of Paris, which won Environmental Finance’s sustainability bond of the year award.
HSBC in its work with the Indonesian government to implement a five-year infrastructure plan, helped to develop the country’s green framework, acting as green structuring adviser on its inaugural green bond – a dual trancher featuring the first-ever green sukuk. HSBC, which operates its own green investment fund and has issued its own green bonds, is one of the top bank supporters of the socially responsible investment market.
As Thomas puts it, debt capital markets get the headlines, and HSBC should be proud of its achievements there this year, but: “All the stuff that goes on behind the bonds themselves is complicated.”
In an already complex year, HSBC has shown it does complicated very well.
