The Malaysian branch of the China Construction Bank (CCB) has suspended the issuance of a $3 billion bond (Longbond SR Notes USD Feb 2021) without explanations, a Reuters report on Nov 23 shows.
The Suspension and Assessment of the Bond Issuance Program
CCB is one of the largest banks in the world by assets and owned by the Chinese government. It is also one of the “Top Four” banks in China. By 2018, the bank had a total of $3.375 trillion in assets with a net income of $37.2 billion.
The issuance of the $3 billion bond has now been halted as the bank reassess the issuance program according to an email sent to CoinDesk.
On Nov 20, CCB Labuan received instructions from Longbond leading to today’s suspension.
CCB Labuan Bank and the $3 Billion Bond
In a shift away from the traditional bond issuance style, the CCB would have leveraged the blockchain technology and accepted BTC and USD on the Fusang exchange, a Malaysian cryptocurrency-focused ramp.
The $3 billion bond was issued by Longbond Ltd–an offshore financial center was tasked with the issuance and depositing of proceeds to CCB’s branch in Labuan.
From the Fusang Exchange, purchasers would have acquired the tokenized bond deployed from the Ethereum blockchain. BTC and USD were the official settlement currencies:
“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 are traded on Fusang Exchange with prices quoted in USD and BTC.”
All funds collected would have been placed on a fixed deposit account set for maturity in February 2021.
$3 Billion or $14 Million
However, there is contention on the amount CCB Labuan planned to raise from the Fusang Exchange. While mainstream media reported a figure around $3 billion, reports place the figure at $14 million.
Overly, the bond would have been backed by funds held in trust at the CCB Labuan branch. Specifically, should there be a default, the bank would not have been liable since the issuer was Longbond Ltd.
In its capacity, the bank will be the arranger, advisor, and listing sponsor but not the guarantor of the bond prospectus. Further, it would not accept settlements in BTC but USD.
Cryptocurrency trading in China is banned. However, as BTCManager previously reported, sporadic Bitcoin (BTC) trading is legal according to a member of the Bank of China Law Research Association.
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