BVI an Increasing Draw for Asian Debt Capital Markets

BVI continues to be a popular jurisdiction for debt capital market deals in Asia, says Ogier’s Hong Kong capital markets partner Nathan Powell, who along with associate Rachel Huang, recently acted as BVI counsel in relation to the establishment and drawdown of a US$3 billion guaranteed medium term note programme using a BVI incorporated issuer by Midea, the leading consumer appliances manufacturer in China with a global presence with annual revenues of over RMB120 billion (approximately US$18 billion). Midea is ranked in Forbes’ Top 500 Global Enterprises and ranks 32nd on Fortune Magazine’s list of China’s Top 500 Enterprises.

Nathan Powell said: “We have seen continued strong demand in the Asian market for the use of BVI issuing vehicles on some of the largest debt issues by both Chinese state owned enterprises and leading private companies. A BVI company can be incorporated cost effectively and very quickly, facilitating even the most urgent transactions; and the corporate law framework in the BVI offers considerable flexibility in relation to the use of the transaction proceeds for the benefit of other members of the group. We expect this strong demand of using BVI issuing vehicles in bonds issues will continue in the future because of the advantages of a BVI company and the BVI law.”

“The offshore renminbi denominated bond (the dim sum bond) market outside the mainland China has developed steadily since the first offshore renminbi bond issue in Hong Kong in 2007. The issuers have expanded to include Ministry of Finance of China, banks, financial institutions and corporates from Hong Kong, mainland China and overseas. Other than the dim sum bond, we also see HK dollar and US dollar denominated bonds being actively issued in the market.”

“In all these bond issues, a newly set up BVI subsidiary is commonly used as the issuer with guarantee from a Hong Kong parent company and sometimes also a quasi-guarantee from the ultimate parent company in mainland China by way of agreeing to keep the BVI issuer in good standing, liquid and, subject to obtaining all necessary PRC regulatory approvals, to purchase, or procure that one of its on-shore subsidiaries purchase, the equity in its offshore subsidiaries for a price equivalent to all amounts due under the bonds.”

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Nathan Powell is a partner in Ogier’s Hong Kong office. He has broad corporate finance practice with particular expertise in using BVI, Cayman and Jersey companies for debt capital markets, IPOs, and private equity. He is an Advocate of Jersey’s Royal Court, and admitted as a solicitor in the BVI.