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China Construction Bank cancels $3BN bond

The bank has stated that it needs to reassess the issuance program

It has been announced that the Malaysian branch of the China Construction Bank (CCB) recently suspended the issuance of a $3 billion bond (Longbond SR Notes USD Feb 2021) without providing any explanation behind the action.

By assets, the government-owned CCB is one of the largest banks in the world and one of the top four banks in China. By the year 2018, the bank held a total of $3.375 trillion in assets, with a net income of $37.2 billion.

According to an email that was sent to CoinDesk, the issuance of the $3 billion bond has been paused temporarily while the bank takes time to reassess the issuance program.

The brief document simply states that “The Issuer through its Listing Sponsor, China Construction Bank Corporation Labuan Branch has decided that the Proposed Issuance will not proceed and the overall bond issuance Programme is being re-evaluated”.

The CCB Labuan received instructions from Longbond that led to today’s suspension.

In the agreement, the CCB would have moved away from traditional bond issuance style and leveraged the capabilities of blockchain technology to accept BTC and USD on the Fusang exchange. The $3 billion bond was issued by Longbond, an offshore financial centre that was responsible for the issuance and depositing of proceeds to the Labuan branch of the CCB.

Interested clients would have used the Fusang Exchange to acquire the tokenised bond that was deployed from the Ethereum blockchain.

“The digital tokens shall constitute direct, unconditional, unsubordinated and secured obligations of the issuer and shall rank pari passu without any preference amongst themselves. The digital tokens will be traded on Fusang Exchange with prices quoted in USD and BTC”, the announcement read.

However, there is contention with regards to the amount that CCB Labuan had intended to raise from the Fusang Exchange. While mainstream media reported that the figure was around $3 billion, others reported the figure at only $14 million.

The bond would have been backed by funds that were held in trust at the CCB Labuan branch. In case that a default occurred, the bank would not have been liable for payments because the issuer was Longbond.

The bank’s capacity would then be limited to acting as the arranger, advisor and listing sponsor. However, it would not be the guarantor of the bond prospectus and it would accept settlements in USD (not in BTC).

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