MTR Corporation has priced a US$1.2 billion offering under its new sustainable finance framework, the largest green bond issuance from Hong Kong so far.

The Reg S 10-year deal was priced at 98.695% with a coupon of 1.625% to offer a yield of 1.768%. This was equivalent to a spread of 108 basis points over the US treasuries, which was at the tight end of the final price guidance of 110bp area (+/- 2bp), and 42bp inside of the initial price guidance of 150bp area.

The transaction was well oversubscribed with an order book of over US$3.75 billion, enabling the rail operator to tighten the pricing. Strong demand was seen from a diverse group of institutional and green investors in Hong Kong and the rest of Asia, as well as in Europe.

MTR chief executive officer Jacob Kam describes the new green bond as a further reflection of the company’s commitment to environment and sustainable community development, particularly in providing a low-carbon mode of transport for Hong Kong.

“The issuance of green bond is an integral part of our financing strategy,” adds MTR finance director Herbert Hui. “We will continue to explore innovative and effective forms of financing to support MTR’s sustainable development.”

With sustainability being a major objective of its corporate strategy, MTR is one of the pioneers in green finance in Hong Kong. It printed its first green bond in October 2016 amounting to US$600 million for 10 years – the first from an Asian rail company. That deal paid a coupon of 2.50% with a yield of 2.537%, or equivalent to a spread of 80bp over the US treasuries.

Together with subsequent green finance arrangements, MTR has raised HK$16.8 billion (US$2.17 billion) so far, funding projects that improve energy efficiency, enhance railway service and conserve nature. These projects include the Kwun Tong line extension, South Island line, replacement of air-cooled chillers in the MTR network, installation of energy storage equipment in a depot and ventilation building, and conservation of the Lok Ma Chau wetland, which is managed by MTR.

The green bond was drawn under MTR’s US$5 billion debt issuance programme. The use of proceeds and eligible investments are governed by the company's sustainable finance framework, which was enhanced in 2020 to cover more eligible investments in support of the United Nations Sustainable Development Goals.

HSBC and Goldman Sachs were the joint global coordinators for the transaction, as well as joint bookrunners and lead managers along with Bank of China (Hong Kong), Credit Agricole CIB, Mizuho Securities and Standard Chartered. HSBC also acted as the sole sustainability adviser for the deal.