DeHeng Advised China Construction Fifth Engineering Division Corp., Ltd. on Issuing China's First PPP-ABCP
2022-04-27
On April 25, 2022, Chongqing Maohe Infrastructure Construction Co., Ltd., a subsidiary of China Construction Fifth Engineering Division Corp. Ltd. issued the 2022 tranche-1 PPP-ABCP (PPP-investing asset-backed commercial paper) at National Association of Financial Market Institutional Investors (NAFMII). The issuance scale was RMB 975 million, of which the coupon rate of senior-tranche ABCP was 2.70% and was subscribed 3.25 times. The underlying assets in the pool are the shadow tolls receivable and subordinated rights as agreed in the PPP Contract for the Longzhou Bay Tunnel Project in Banan District.
This was the first PPP-ABCP issuance in China and an important financial innovation in the PPP financing model. The DeHeng team, after careful studies and repeated discussion, combined the long-term asset of PPP with the strength of ABCP whose maturity term can be shortened, divided long-term assets into short-term ones and issued them on a rolling basis, thus solving the problem that issuers bear liquidity pressure and interest rate inversion risk in traditional issuances. China National Investment and Guaranty Corporation was introduced for liquidity support, to support the issuer to sell off the underlying assets to the products, thus provide strong credit support for investors, and reduce the issuance cost and difficulty, and meeting the issuer's demand for moving the assets off the balance sheet.
As the special legal counsel for the issuance, the DeHeng team, led by partner Kong Weiping and specifically undertaken by lawyers Liu Ziwei and Liu Yanyan, provided legal services including due diligence, proposal on transaction structure design and preparation of transaction documents. They worked closely with the issuer, the lead underwriter Huatai Securities and China National Investment and Guaranty Corporation, repeatedly modified the transaction documents and communicated with NAFMII, and finally obtained the non-objection letter.
