The Hong Kong Mortgage Corporation (HKMC) has completed its second infrastructure loan-backed securities (ILBS) issuance of $423.3 million, according to a recent announcement.
The issuance was arranged through a special purpose vehicle (SPV), Bauhinia ILBS 2 (Bauhinia 2) and it follows HKMC’s first ILBS issuance in May 2023 for $404.8 million under Bauhinia 1, which was part of HKMC's pilot scheme for infrastructure financing securitisation.
The HKMC, which is headquartered in the International Commerce Centre (ICC) in West Kowloon, made a loss after tax of HK$260 million ($33.4 million) in 2023 compared with an after tax profit of HK$2.16 billion in 2022.
There are some repeat investors, while new investors include insurers, pension funds, security firms, and local and international financial institutions. The Asian Infrastructure Investment Bank (AIIB), through a $300 million investment programme, participated in Bauhinia 2 as an anchor investor, following a similar path in Bauhinia 1, as the AIIB continues to place private capital into the infrastructure sector.
Bauhinia 2 has a portfolio of 28 project and infrastructure loans across 26 individual projects spreading across 14 countries and 10 sub-sectors, with a total value of approximately $423.3 million. In total, five classes of notes were issued: Class A1-SU, Class A1, Class B, Class C and Class D; these were all investment grade rated, with an aggregate principal of $386.7 million. The issued notes are listed on The Hong Kong Stock Exchange (HKEX).
The HKMC was the sponsor, collateral manager and risk retention holder of the transaction.
Within the capital structure of Bauhinia 2, there is a $107 million sustainability tranche (Class A1-SU) backed by sustainable, green and social assets. Class A1-SU was issued in accordance with the HKMC’s Social, Green and Sustainability Financing Framework, which aligns with the Green Bond Principles, Social Bond Principles and Sustainability Bond Guidelines released by the International Capital Market Association.
The HKMC has recently issued reports on how its framework has been performing over the last few years, with a HK$8 billion tranche issued in October 25, 2022 to mature on October 25, 2024.
Working on Bauhinia 2, Standard Chartered Bank was the sole global coordinator, while China International Capital Corporation Hong Kong Securities, ING Bank, Singapore Branch, MUFG Securities, Natixis Hong Kong Branch and Standard Chartered Bank were the joint bookrunners. Fubon Bank (Hong Kong) and Korea Investment & Securities are the co-managers.
The legal counsels were Linklaters and Clifford Chance.
Raymond Li, executive director and chief executive officer (CEO) of the HKMC, said in the statement, “The success of Bauhinia 2 issuance demonstrated investors’ growing interest in the infrastructure loan asset class. The issuance further supports the development of Hong Kong as an infrastructure financing hub, facilitating inflow of market capital to high-quality infrastructure projects, and expanding the securitisation market in Asia.”
In February this year, HKMC issued HK$12 billion of bonds under its US$30 billion medium term note programme. At the time, this was the largest HKD senior unsecured public bond transaction and the largest 10-year HKD public issuance in the institutional market.
New CEO
Meanwhile, Colin Pou Hak Wan is set to become the new CEO of the HKMC with effect from December 26, 2024, according to an announcement in the summer.
Pou, who is the executive director or the financial infrastructure department at the Hong Kong Monetary Authority (HKMA), will succeed Raymond Li who will be retiring from the HKMC after 11 years at the firm.
