The Government of the Hong Kong Special Administrative Region of the People’s Republic of China continued to ramp up its green bond offering as it priced on November 23 five billion offshore renminbi (US$782.50 million) worth of green bond. The dual-tranche transaction represents the HKSAR Government’s inaugural issuance of renminbi-denominated bond – setting an important new benchmark for the offshore renminbi market. The new transaction also came just a week after it printed its third G3 green bond on November 17 amounting to US$3 billion equivalent that included its debut issuance in the euro bond market.
The Reg S deal is equally split at 2.5 billion yuan each with the three-year tranche priced at par with a similar coupon and re-offer yield of 2.80%. This was in line with the final price guidance and 40bp tighter than the initial guidance of 3.20% area. The other tranche was for five years, which was also priced at par with a coupon and re-offer yield of 3%. This was likewise in line with the final price guidance and 40bp inside of the initial price range of 3.40% area.
The green bond garnered strong demand from a diversified group of investors despite recent market volatility, with the two tranches attracting over 14.2 billion yuan worth of orders. By type of investors, 54% of the bond was distributed to banks, 35% to fund managers, private banks and insurance companies, and 11% to supranationals, official institutions and corporates.
Commenting on the transaction, the HKSAR Government's financial secretary Paul Chan says the bond contributes to promoting the internationalization of the renminbi. “It also strengthens the Hong Kong platform to better serve renminbi issuers who raise green financing in support of low-carbon transition efforts,” he points out. “Together with the US dollar and euro-denominated green bond offerings last week, it demonstrates our continued commitment to further develop the green bond market through piloting issuances with different parameters.”
The green bond is being issued under the global medium-term note programme dedicated to green bond issuances established earlier this year. The proceeds raised under the programme will be credited to the Capital Works Reserve Fund to finance or refinance government projects that provide environmental benefits and support the sustainable development of Hong Kong.
The HKSAR Government published its green bond framework in 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. Vigeo Eiris has provided a second-party opinion for the green bond framework. The green bond has also received the green finance certificate (pre-issuance stage) from the Hong Kong Quality Assurance Agency.
Crédit Agricole CIB and HSBC acted as the joint green structuring banks, global coordinators, bookrunners and lead managers for the transaction. ICBC (Asia) also acted as joint global coordinator for deal, as well as joint bookrunner and joint lead manager with Bank of China (Hong Kong), Bank of Communications, Mizuho Securities and Standard Chartered.