The Hong Kong government has priced the retail portion of its landmark tunnel securitization. The HK$2.47 billion ($317 million) of notes on offer to the public are divided into three tranches and will be listed on the stock exchange.
The HK$880 million three-year notes pay a coupon of 2.75% and are priced at 98.87%. The HK$800 million five-year notes pay a coupon of 3.6% and are priced at 97.9%. The HK$790 million seven-year notes pay a coupon of 4.28% and are priced at 97.4%.
All of the notes are rated AA-, Aa3 and AA+ by Standard & Poor's, Moody's and Fitch, and are issued through the Hong Kong Link 2004 special purpose vehicle.
Retail investors were courted through adverts on buses, bill-boards and even from flyers handed out at the toll-booths of tunnels being securitized. Further, the government conducted educational seminars through the Territory's district councils. The marketing effort paid off. Hong Kong punters subscribed for three times as many bonds as were on offer, with the three-year bond 4.6 times subscribed, the five-year 1.6 times subscribed and the seven-year 2.9 times subscribed.
"The Government's objective is to facilitate further development of the capital market in Hong Kong and I hope this transaction will serve as a stimulus to attract more private sector and non-government entities to consider launching their own structured or plain debt products in Hong Kong and to our retail investors," said Frederick Ma, secretary for financial services and the treasury, at a ceremony held at Government House. "This will help to consolidate Hong Kong's position as an international financial centre."
HSBC acted as the sole bookrunner on the retail tranche and as joint bookrunner, with Citigroup, on the institutional tranche.