The Hong Kong Mortgage Corporation (HKMC) has issued its third social bond issuance of around HK$23.8 billion ($3 billion).
The issuance, on October 9, is the largest social bond issuance in Asia Pacific, breaking the record set by the HKMC in September 2023 when it launched its second social bonds of close to HK$20 billion.
The triple-currency social bond issuance with four tranches comprises HK$7 billion 2-year, HK$8 billion five-year, CNH2 billion seven-year and $850 million three-year social bonds.
The HKMC said that the issuance was "well received" by local and overseas institutional investors including banks, investment funds, government-related funds, wealth management firms and private banks. There was a combined peak order book of around HK$55 billion equivalent and final allocation to over 200 accounts.
The issuance followed a series of investor roadshows and an improvement in market sentiment, the issuance was book-built and priced in Hong Kong.
Moreover, the two Hong Kong dollar (HKD) tranches totalling HK$15 billion was the largest-ever institutional bond denominated in HKD, while the Renminbi (CNH) tranche was the first ever seven-year institutional bond denominated in CNH. The issuance has helped to establish new benchmarks across the yield curve for the market and has further facilitated the bond market development in Hong Kong.
The net proceeds from the issuance will mainly be used to finance or refinance the loans under the special 100% loan guarantee of the SME Financing Guarantee Scheme. The special 100% loan guarantee was launched in April 2020 to alleviate the cash flow pressure of small and medium-sized enterprises (SMEs) in Hong Kong during the Covid-19 pandemic, helping to minimise business shut-downs and layoffs.
The application period for the special 100% loan guarantee expired at end March 2, 2024. The product has been taken up by 40,000 local SMEs and 400,000 related employees up to September 2024. Earlier this week, Hong Kong's chief executive John Lee offered a principal moratorium for up to 12 months under the SME Financing Guarantee Scheme.
Raymond Li, executive director and chief executive officer of the HKMC, said in statement: “Our record-breaking social bond issuance once again demonstrated investors’ strong confidence in Hong Kong and the HKMC."
Li added: "With the financing from a broadened investor base and the participation of a diverse group of financial institutions, the HKMC will continue to deliver on its policy missions, support the local development of sustainable finance and further solidify Hong Kong’s role as an international financial centre.”
The social bonds are issued pursuant to the HKMC’s Social, Green and Sustainability Financing Framework (SGS Framework).
The joint global coordinators, joint bookrunners and joint lead managers on the deal were: Bank of China (Hong Kong), Crédit Agricole CIB, HSBC, and Standard Chartered Bank. The joint bookrunners and joint lead managers were ANZ, BNP Paribas, China Construction Bank (Asia), Citigroup, DBS Bank, ICBC (Asia), and Mizuho United Overseas Bank
The joint lead managers on the deal were Bank of Communications, Barclays, China CITIC Bank International, China International Capital Corporation, JP Morgan, Morgan Stanley, Natixis, OCBC, SMBC, Nikko and UBS. The joint structuring banks on the deal were Crédit Agricole CIB and HSBC.
Clifford Chance helped advise the HKMC on the deal.
Mark Chan, lead partner at Clifford Chance, said, "This transaction, which sets new benchmarks, underscores the robust investor confidence in Hong Kong's financial markets and reflects the growing momentum for sustainable finance in the region.”
