Chinese Bank Promotes $4 Billion IPO

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Five percent of the offering has been earmarked for Hong Kong retail investors, and due to the large size of the offering, the company has also obtained a waiver that caps the retail tranche at 20% even at a full clawback. If the retail offering is between 15 and 50 times covered, it will trigger an increase to 7.5%; a subscription ratio between 50 and 100 will increase the retail tranche to 10%; and above 100 times, it will result in a 20% retail tranche.

Minsheng has attracted five cornerstone investors: Yeung Chun Kam and Yeung Chun

Fan will buy a combined $100 million worth of shares; Hong Kong-listed Chinese Estates will also buy $100 million; China Overseas Finance will take $60 million; an individual named Yin Chung-yao will take $50 million; and Ping An of China Asset Management has committed to buy $30 million worth of shares.

The proceeds from the Hong Kong IPO will be used to strengthen the bank's core capital after its capital adequacy ratio fell to 8.5% in the second quarter—the second lowest among China's 14 listed banks, according to Bloomberg. A lack of capital is limiting the extent to which Minsheng can grow its loan book, and is thus preventing the bank from participating in full in the country's rapid rebound from the financial crisis.

The Hong Kong public offering will launch on Friday and stay open for the usual 3.5 days, closing on November 18, when the deal is also expected to price. The trading debut is scheduled for November 26.

UBS is the sole global coordinator for the Minsheng IPO and will be joined as a bookrunner by BOC International, China International Capital Corp (CICC), Macquarie and small China-based securities firm, Hai Tong, at descending levels of economics.

Minsheng will be in the market at the same time as Sands China, the spin-off of Las Vegas Sands' Macau operation, which is also launching formal bookbuilding today. As of last night, it was still not clear exactly how many secondary shares the parent company would be selling as part of the IPO, but the total deal is expected to be about $2.5 billion. Citi and Goldman Sachs are joint global coordinators and joint bookrunners together with Barclays Capital, BNP Paribas and UBS.

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