Global bank HSBC has issued its first HK$1 billion ($130 million) Hong Kong dollar-denominated senior unsecured fixed rate digitally native notes (DNNs) on the Hong Kong Stock Exchange (HKEX).
The DNNs are 3.6% and due 2025 under the bank’s $20 billion medium term note programme, and were issued with a T+2 settlement window.
FinanceAsia understands that this is the first digitally native bond by a private sector issuer in Hong Kong, as well as the first English law digital bond issuance in Hong Kong.
HSBC Orion, a distributed ledger technology platform, was used to help create and settle the notes. The Hong Kong Monetary Authority's (HKMA) Central Moneymarkets Unit (CMU) operates HSBC Orion, which digitally native bond issuance and settlement via the CMU’s infrastructure.
HSBC acted as sole global coordinator, sole bookrunner, fiscal agent, principal paying agent and registrar for this transaction.
John O’Neill, group head of digital assets and currencies, HSBC, said in a statement: “We expect to see increasing demand for digital bonds from the private sector if they can access the liquidity and scale seen on our HSBC Orion platform. We look forward to further developing this market.”
Eugene Ng, managing director, head of debt capital markets, Greater China, investment banking, HSBC, added: “This transaction promotes the digitisation of Hong Kong's capital market, setting a benchmark for future digital bond issuances by the private sector.”
Global law firm Linklaters advised HSBC on the transaction. The Linklaters’ team was led by capital markets partner Gloria Cheung, with support from counsel Grace Wee and managing associate Lily Wang. A separate team led by counsel Beibei Ding acted as legal adviser to the fiscal agent, according to a statement from the firm.
Cheung commented: “Our cross-practice team is honoured to have supported with this unique transaction, drawing on our knowledge and expertise from advising on the pioneering digital bond offerings by the Hong Kong SAR Government. We are excited to be collaborating closely with our clients in the progression of Hong Kong as an international digital bonds hub in the region.”]
Law firm Ashurst also helped HSBC with HSBC Orion on the deal.
Ashurst's financial regulatory partner and Hong Kong managing partner Ben Hammond, London-based bank industry global co-chair Etay Katz, Hong Kong-based debt capital markets partner and global head of finance, funds and restructuring Jini Lee, and digital economy transaction partner Josh Cole all worked on the deal; they were supported by senior associates Jamie Jefferson Ng, Janet Ouyang and Sean Ching, and associate Anna He.
Global law firm Clifford Chance also advised HSBC on the transaction. Clifford Chance's partners Mark Chan and Matteo Sbraga co-led the transaction and were supported by senior associates George Mok and Jeffery Hung, and associates Christine Chan and Louis Yee. Partners Rocky Mui and Terry Yang also advised on regulatory aspects of the issuance.
Chan said in a media release: "This transaction highlights the growing appeal of digital bonds, providing investors with greater efficiency and ease. We foresee a substantial increase in demand for digital bonds, particularly if they can benefit from the liquidity and scale offered by platforms like HSBC Orion."
Sbraga added: "This issuance emphasises the flexibility and reliability of English law in supporting cutting-edge financial innovations. By leveraging English law, we have ensured a robust legal foundation that can accommodate the complexities of digital bonds. This milestone not only enhances investor confidence but also sets a precedent for future issuances in the digital bond market."
