Bank of China to sell up to $5.86 billion in bonds

The country's third-largest bank, Bank of China Ltd (BOC) plans to issue up to 40 billion yuan ($5.86 billion) in convertible bonds to replenish capital, a statement released on Friday said.

The proposal which has been approved by the bank's board, is subject to approval by the shareholders of BOC at an extraordinary general meeting scheduled on 19 March 2010.

The bank said that it would also seek a general mandate to issue 20 per cent of its issued Shanghai-listed A shares and Hong Kong listed H shares, which numbers 35.56 billion and 15.20 billion respectively.

The statement said: ''Bank of China has adhered to the central bank's proactive fiscal policy and moderately loose monetary policy to promote growth, stimulate domestic demand, adjust structure and its loan assets have seen unparalleled rapid growth.''

The convertible corporate bonds will have a nominal value of 100 yuan ($14.63) each with maturity of 6 years, and will carry an annual interest rate of not more than 3 per cent which will be finalised by the Board prior to the issue. On maturity, the bonds can be converted into BOC's A shares.

The proceeds from the issuance of the convertible bonds will be used to boost the capital base of BOC and its working capital, in order to improve its capital adequacy ratio (CAR), the statement said.