The Government of the Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR) on May 31 raised close to US$6 billion in its biggest offering of multi-currency, multi-tranche green bonds.
The latest issuances under its green bond programme exceeded the US$5.75 billion equivalent that it raised in January this year – also in multi-currencies and multi-tranches – in what was then described as the largest ESG bond offering in Asia.
Following a virtual roadshow on May 30, HKSAR priced a total of US$2.25 billion in three tranches, €1.5 billion (US$1.6 billion) in two tranches and 15 billion yuan (US$2.12 billion) in three tranches, or the equivalent of US$5.97 billion in all, attracting about US$30 billion worth of demand. In particular, the renminbi tranches were expanded from a combined 10 billion yuan from the January issuance to 15 billion yuan this time, with the additional offering of a 10-year tranche.
The Reg S/144A US dollar offering comprised of a three-year tranche amounting to US$500 million, which was priced at 99.747% with a coupon of 4.25% to offer a yield of 4.341%. This represented a spread of 30bp over the US treasuries, or 35bp tighter than the initial price guidance of 65bp area.
The second tranche was for five years amounting to US$750 million, which was priced at 99.570% with a coupon of 4% to offer a yield of 4.096%. This was equivalent to a spread of 35bp over the US treasuries, or 35bp inside of the initial price range of 70bp area. The final tranche was for 10 years amounting to US$1 billion, which was priced at 99.665% with a coupon of 4% and a re-offer yield of 4.041%. This represented a spread of 40bp over the US treasuries, or 40bp tighter that the initial price guidance of 80bp area.
The US dollar issuance garnered a total order book of US$14.4 billion with the three-year tranche attracting over US$3.4 billion from 110 accounts, while the five-year tenor generated orders worth US$5.4 billion from 165 accounts. The 10-year tranche secured a total demand of US$5.6 billion from over 200 accounts.
The Reg S euro tranche was equally split at €750 million each for four years with a yield of 3.406% and for nine years with a yield of 3.847%. The four-year tenor generated a total demand of €1.7 billion from over 50 accounts, while the nine-year bond attracted €3.5 billion worth of orders from 90 accounts.
Renminbi internationalization
The Reg S renminbi tranche, which was priced at par, consisted of a two-year tenor amounting to 6 billion yuan with a coupon and re-offer yield of 2.70%, five-year tenor amounting to 6 billion yuan with a similar coupon and re-offer yield of 2.95% and a 10-year maturity amounting to 3 billion yuan with a coupon and re-offer yield of 3.30%.
In terms of demand, the two-year tenor generated a total order book of 28 billion yuan from 80 accounts, the five-year tenor 20.7 billion yuan from 67 accounts, and the 10-year tenor 19.8 billion yuan from 68 accounts.
The Financial Secretary Paul Chan says the enthusiasm for Hong Kong green bonds from global investors demonstrates their recognition of Hong Kong’s efforts in green and sustainable development. “The offering has included our first 10-year renminbi green bond, which helps to extend the offshore renminbi yield curve and continues to enrich the offshore renminbi product offerings, promoting the renminbi internationalization in an orderly manner,” he notes. “We will continue to regularly issue green bonds to promote innovation and further development of the market.”
The green bonds are being issued under the global medium-term note programme dedicated to green bond issuances established in early 2021 and listed on the Hong Kong Stock Exchange and the London Stock Exchange. The bond proceeds will be credited to the capital works reserve fund to finance or refinance projects that provide environmental benefits and support the sustainable development of Hong Kong.
The HKSAR Government published its green bond framework in March 2019, which sets out how green bond proceeds will be used to fund projects that will improve the environment and facilitate the transition to a low-carbon economy. The framework was subsequently updated in February 2022, reflecting the government’s latest climate commitments and strategy and aligning with the latest international standards and practices in the green bond market.
Vigeo Eiris, which is now part of Moody’s ESG Solutions, has provided a second-party opinion for both the original and updated green bond framework. The green bonds have also received the Green and Sustainable Finance Certificate (pre-issuance stage) from the Hong Kong Quality Assurance Agency. The HKSAR Government has since published three annual reports on the allocation of the proceeds from previous green bond issuances and the expected environmental benefits of the projects financed.
Crédit Agricole CIB and HSBC acted as the joint green structuring banks, global coordinators, bookrunners and lead managers for all the bond tranches. For the US dollar and euro tranches, Citi and J.P. Morgan acted as joint global coordinators, as well as joint bookrunners and lead managers along with BNP Paribas, BofA Securities, Morgan Stanley and UBS. Mizuho also acted as a joint bookrunner and lead manager for the US dollar tranche. For the CNH offering, Bank of China (Hong Kong) and ICBC (Asia) were the joint global coordinators, as well as joint bookrunners and lead managers together with Bank of Communications and Standard Chartered.
