China Petrochemical Development (CPD) of Taiwan has raised US$132 million from a convertible bond to help finance a new plant in the mainland Chinese province of Jiangsu.

The five-year issue is backed by irrevocable standby letters of credit (L/Cs) from two Taiwanese banks.

Bank backing

The L/Cs have been issued separately by CTBC Bank and Taiwan Cooperative Bank.

Using two banks rather than one to enhance the issue with L/Cs is unusual and CPD most likely chose this option to strengthen its credit.

Chinese concerns

The petrochemicals sector is considered relatively volatile while the two banks are both A-rated by Standard and Poor's.

The Chinese authorities and analysts have repeatedly expressed concerns about L/C enhanced bonds, suggesting that this way of raising funds is riskier than it appears, (DC World News, 28 February 2014 and 17 March 2014).

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