The deal follows a raft of green bonds over the last few months (see below). As well as giving issuers some good PR, these deals also allow them to diversify their investor base. This is particularly true in the European market, where specialist green bond funds provide a captive investor base — and a relatively easy sell. European and Middle Eastern investors took 17% of the new deal.
The bulk of the deal was, however, taken by Asian investors, who bought the remaining 83%. This is a group that does not have a well-established green bond investor base, but Asian investors are becoming more used to putting their money into environmentally-friendly deals.
Asian green bond issuance has grown dramatically in the second half of this year. Out of the $10.3 billion green bonds that have been sold by Asian issuers since 2013, a whopping $4.5 billion were sold in the third quarter. When you include MTR Corp's deal, almost half of all Asian green bonds were sold in the last four months, according to Dealogic and FinanceAsia data.
MTR Corp’s deal priced with little or new issue premium, according to bankers. This should not necessarily be taken as a vote of confidence in the green bond format — Aa1/AAA rated Hong Kong issuers are reasonably rare in the dollar bond market — but it certainly did not hurt.
The company initially went out with a price guidance of “the 95bp area” over 10-year Treasuries, before tightening the spread to 80bp. The price of the November 2026 bond was fixed at 99.675, yielding 2.537% off a coupon of 2.5%.
There were two main benchmarks, according to bankers. The closest comparable was Aa1/AA-rated PSA International's April 2026 $500 million bond, which was trading at a G-spread of 84bp on Monday, according to a syndicate banker.
The second benchmark was the Hong Kong government's outstanding 2022 dollar-denominated sukuk bond, which was trading on a G-spread of 65bp. The Hong Kong government owns more than 75% of MTR.
The Reg S deal garnered more than $1.4 billion of orders from 94 accounts, which allowed MTR Corp to upsize the 10-year note to $600 million, up from its original target of $500 million, according to a person familiar with the transaction.
By investor type, asset mangers took 56%, banks 26%, insurance 16%, and private banks and other investors the remaining 2%.
The joint bookrunners of the deal were HSBC, Bank of America Merrill Lynch and Goldman Sachs.
