Dacheng Advised Issuance of RMB Bonds in Hong Kong by Beijing Enterprises Water Group Limited

Beijing Enterprises Water Group Limited (00371HK) succeeded to issue Bonds of CNY 1.45 billion in Hong Kong on June 30, 2011, among which CNY 1,000,000.000 due 2014 at the rate of 3.75 percent per year and CNY 450,000,000 due 2016 at the rate of 5.0 percent per year.  While the interest rate of bank loan in mainland China is 6.4% per year for three-year period and 6.65% per year for five-year period.  Comparing with the difficulties confronted by the domestic enterprises with respect to finance, Beijing Enterprises Water Group Limited has realized financing at low costs through its window company in Hong Kong.
 
Currently, the issuance of RMB bonds by non-financial institution is still under exploration, and no advanced approval regulations and rules have been promulgated.  Until December 2010, the research report of Goldman Sachs shows that the total amount of RMB deposit in Hong Kong reaches CNY 279.6 billion, which has increased by 28.8% on a monthly basis.  A Hong Kong window company, through shareholder loan, the difference between investment and registered investment and other ways, may repatriate RMB funds raised through issuance of bonds to mainland China, which will offer financial support for the domestic entities and breakthrough the restriction on the repatriation of RMB.  Thus such financial product has received a wide range of welcome from enterprises and investment banks.  So far, besides Beijing Enterprises Water Group Limited, only SINOTRUK (Hong Kong) Limited, China Resources Power Holdings Company Limited and SINOCHEM Hong Kong (Group) Co., Ltd. have succeeded in issuing RMB bonds in Hong Kong.
 
The issuance of bonds lasted for five months.  Dacheng Team, which consisted of Senior Partner Yuanliang Qiu, Feng Wang, Lin Zhou and Jinghe Wang has rendered qualified services for the issuance as domestic legal counsel.  The underwriters include Goldman Sachs (Asia)L.L.C., Merrill Lynch International, Macquarie Capital (Singapore) Pte.Limited, Morgan Stanley& Co.International plc, Standard Chartered Bank(Hong Kong)Limited and DBS Bank Ltd..  Through the successful cooperation with these world-leading investment banks, Dacheng lawyers has demonstrated their professional skill and attitude.  The international legal counsel of the issuer is Mayer Brown JSM.  The PRC legal counsel of the underwriters is Grandall Legal Group（Beijing） and the international legal counsel is Linklaters.
 
Beijing Enterprises Water Group Limited is listed in the main board of Hong Kong Exchange and the registered capital of which is HKD 1.5 billion.  The value of the total assets of the company is HKD 6 billion and the market value is HKD 11 billion.  The company is held by Beijing Enterprises Group Company Limited, which is also listed in the main board of Hong Kong Exchange (00392HK).  Beijing Enterprises Group Company Limited, which has been listed in Hong Kong in May 1997, is the window company of Beijing government in the international capital market of Hong Kong and takes up 1/4 of the total size of state-owned business assets managed by Beijing SASAC.