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Treasury & Capital Markets
HKMC completes first issuance of infra loan-backed securities
The offering includes a US$100 million sustainable finance tranche backed by sustainable, green and social assets
The Asset 31 May 2023

The Hong Kong Mortgage Corporation Limited (HKMC) on May 30 announced the successful completion of its first issuance of infrastructure loan-backed securities under its pilot scheme on infrastructure financing securitization. This is executed through a special purpose vehicle (SPV), Bauhinia ILBS 1 Limited (Bauhinia 1). As a policy measure in Hong Kong's 2022-23 budget, the issuance of Bauhinia 1 marks an important step taken by the HKMC towards developing an infrastructure financing securitization platform in the special administrative region.

Hong Kong Financial Secretary Paul Chan says the issuance of Bauhinia 1 will enable the local infrastructure financing market to become more vibrant and diversified, and also facilitate the inflow of market capital to high-quality infrastructure projects. “This will enable the development of the infrastructure financing hub in Hong Kong, and propel Hong Kong to become the premier overseas financing platform under the national Belt and Road Initiative,” he adds.

Bauhinia 1 has a portfolio of 35 project and infrastructure loans in 25 individual projects across 12 countries and nine sectors, with a total value of US$404.8 million. Bauhinia 1 offers institutional investors exposure to a diversified portfolio of project finance, infrastructure and corporate loans across multiple geographies and sectors.

Following a two-week roadshow, Bauhinia 1 has garnered strong interest from investors with diversified background including multilateral, local and international financial institutions, insurance companies, and asset managers. In total, five classes of notes are issued (Class A1-SU, Class A1, Class B, Class C and Class D), all of which are rated investment-grade, with aggregate principal of US$364.4 million. The issued notes are listed on the Hong Kong Stock Exchange, the first listed asset-backed securities on the exchange since the global financial crisis in 2008. The HKMC acts as the sponsor, collateral manager and risk retention holder of the transaction.

Within the capital structure of Bauhinia 1, there is a US$100 million sustainability tranche (Class A1-SU) backed by sustainable, green and social assets. Class A1-SU is 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. It demonstrates the HKMC’s commitment to green and sustainable development.

Asian Infrastructure Investment Bank (AIIB) participated in this issuance as an anchor investor, as a way to fulfil its strategic priority to mobilize private capital into the infrastructure sector.

“The debut issuance of Bauhinia 1 is an important milestone that will contribute to the deepening of the infrastructure securitization market in Asia. It continues our aim to support our clients by delivering innovative solutions to attract private capital into emerging market infrastructure,” says Konstantin Limitovsky, AIIB's vice-president for investment operations (Region 2), “AIIB looks forward to continuing our cooperation with the HKMC to support the further issuances under the infrastructure securitization platform along Paris-aligned and net-zero development pathway.”

Standard Chartered acted as the sole structuring bank as well as a joint global coordinator, bookrunner and lead manager along with ING Bank and MUFG Securities Asia for the transaction. Fubon Bank (Hong Kong) was the co-manager of the offering. Linklaters advised the HKMC on the deal.

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Abhishek Tyagi
Abhishek Tyagi
Moody's Investors Service
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Jang Ping Thia
Jang Ping Thia
lead economist and economics department manager
Asian Infrastructure Investment Bank
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