* B.C. gov't working with HSBC on potential yuan bond deal
* Officials on way to Hong Kong, Singapore for investor tour
* No deal yet; size and duration undetermined
By Claire Sibonney
TORONTO, Dec 6 British Columbia is looking to
sell "dim sum" bonds denominated in Chinese currency, a local
official said, in what could be the first time a foreign
provincial government has sampled the offshore debt market of
the world's second largest economy.
The western Canadian province's treasury officials are on
their way to Asia, with stops in Hong Kong and Singapore, to
meet institutional investors and gauge appetite for B.C. bonds
issued in the yuan currency, formally known as the renminbi.
"It reflects our desire to promote stronger relations
between B.C., Canada and China and the potential for accessing a
new source of global liquidity," Jamie Edwardson, director of
communications for B.C.'s ministry of finance, said on Thursday.
Edwardson said the government has hired HSBC
bankers to work on the deal.
He cautioned that the work was still exploratory and
described the tour as a non-deal road show, designed to raise
the west coast province's profile with overseas investors.
Strong growth in the offshore yuan bond market has been
luring more global corporate issuers to tap the emerging market
as China has stepped up efforts to open its capital markets and
internationalize its currency.
REFLECTS STRONG ASIA LINKS
British Columbia has a large Chinese population, much of it
based in and near the coastal city of Vancouver, and China is
the province's second largest trading partner after the United
States. B.C. exports more goods and commodities such as pulp to
China than to any Canadian province.
The Globe and Mail newspaper, citing an unnamed source, said
that if the "dim sum" bond deal goes through, the sale would
raise a minimum of 500 million yuan or about $80 million.
Edwardson declined to comment on the potential size of the deal.
Like most Canadian provinces and the federal government,
British Columbia saw its budget deficit spike during the
financial crisis and has looked abroad for capital.
About 18 percent of B.C.'s gross outstanding debt is issued
in foreign currencies including U.S. dollars and euros,
The government needs to borrow about C$7 billion ($7.08
billion) in the current fiscal year, ending March 31. So far,
the ministry said it has borrowed more than C$5 billion.
The province has promised to balance its budget by 2014 by
keeping tighter control on spending growth, increasing
healthcare premiums and selling some government assets.
The government said last month its deficit for 2012-13 had
grown to C$1.47 billion from the C$968 million projected in
The B.C. government has one of the strongest provincial
credit profiles in Canada, equal to or just slightly below the
top triple-A rating the federal government enjoys.
"As the first government to issue into this market, and one
of the few AAA-rated issuers in the renminbi market, B.C. bonds
should be attractive to investors looking for a safe place to
invest," added Edwardson.
B.C.'s abundant natural resources, travel and leisure
industries and its role as "Canada's gateway to Asia" have been
a big support to its economy, though a cooling housing market,
especially in Vancouver, has caused investors some concern.
Claudio Ferri, senior fixed income portfolio manager at
State Street Global Advisors in Montreal, said the bonds would
be positive in encouraging more trade between Canada and China.
But he noted he is slightly underweight B.C. provincial bonds.
"If you have another downturn in the economy and globally,
B.C. can get impacted. There's a double whammy play there in the
sense that it can get hit from the downturn from the U.S. and
the downturn that you're seeing coming out of China," said