HKSAR Government’s Sukuk Offering
The following is issued by the Hong Kong Monetary Authority:
The Government of the Hong Kong Special Administrative Region of the People’s Republic of China (the “HKSAR Government”) today announced the successful offering of its third sukuk (the “Sukuk”) under the Government Bond Programme.
The Sukuk, with an issuance size of US$1 billion and a tenor of 10 years, is the third USD-denominated sukuk launched by the HKSAR Government, subsequent to the issuances in September 2014 and June 2015. It is a landmark transaction since Hong Kong is the first AAA-government to launch a sukuk with a 10-year tenor. Compared with the 5-year tenor of the past two sukuk, this latest 10-year sukuk has extended the yield curve, setting an important new benchmark for potential issuers in Hong Kong and globally.
Following a global roadshow commencing on 13 February 2017, covering Riyadh, Jeddah, Dubai, Abu Dhabi, Kuala Lumpur, Singapore, Hong Kong and London, the Reg S USD Sukuk was priced on 21 February 2017 at 3.132% (68 basis points over 10-year US Treasuries). Despite the uncertain global environment and the longer tenor, the Sukuk saw strong demand from global investors, attracting orders of US$1.72 billion, which was 1.72 times the issuance size, allowing the final pricing to be tightened by 7 basis points from the mid-point of its initial price guidance.
The deal attracted interest from a diverse group of conventional and Islamic investors. Orders were received from over 88 global institutional investors, and 57% of the Sukuk was distributed to Asia, 25% to the Middle East and 18% to Europe. By investor type, 53% was distributed to banks, 36% to fund managers, private banks and insurance companies, and 11% to sovereign wealth funds, central banks and supranationals. The 10-year tenor has also attracted new investors, with over half of them not having participated in the previous issuances.
“The success of the transaction is a testament to investor confidence in Hong Kong’s credit strengths and economic fundamentals. I hope that the sukuk issuance will provide momentum for further growth of the sukuk market in Hong Kong and attract more issuers and investors to participate in our bond market,” the Financial Secretary of Hong Kong, Mr Paul Chan, said.
Same as the second sukuk, the Sukuk uses a Wakalah structure, with one-third of assets underpinned by selected units in commercial properties in Hong Kong, and two-thirds of assets underpinned by shariah-compliant commodities.
The Sukuk is issued by a special purpose vehicle, Hong Kong Sukuk 2017 Limited, established and wholly owned by the HKSAR Government. The Sukuk is expected to be settled on 28 February 2017 and listed on the Hong Kong Stock Exchange, Bursa Malaysia (Exempt Regime) and Nasdaq Dubai. The Sukuk has been assigned credit ratings of AAA by Standard and Poor’s and AA+ by Fitch.
The Hong Kong Monetary Authority acts as the HKSAR Government’s representative in the Sukuk offering under the Government Bond Programme. The primary objective of the Government Bond Programme is to promote the further and sustainable development of the local bond market.
HSBC and Standard Chartered Bank acted as Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners, and CIMB and National Bank of Abu Dhabi PJSC acted as Joint Lead Managers and Joint Bookrunners for the Sukuk offering.
Hong Kong Monetary Authority
22 February 2017
NOT FOR RELEASE, PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES OF AMERICA, CANADA, AUSTRALIA OR JAPAN OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION OR DISSEMINATION WOULD BE PROHIBITED BY APPLICABLE LAW.
THE INFORMATION CONTAINED HEREIN IS NOT FOR PUBLICATION OR DISTRIBUTION, DIRECTLY OR INDIRECTLY, IN WHOLE OR IN PART, IN OR INTO THE UNITED STATES, CANADA, AUSTRALIA OR JAPAN OR IN ANY OTHER JURISDICTION IN WHICH SUCH DISTRIBUTION OR DISSEMINATION WOULD BE PROHIBITED BY APPLICABLE LAW. THE MATERIAL SET FORTH HEREIN IS FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED, AND SHOULD NOT BE CONSTRUED, AS AN OFFER OF, OR A SOLICITATION OF AN OFFER TO BUY, SECURITIES FOR SALE INTO THE UNITED STATES OR ANY OTHER JURISDICTION. THE SECURITIES DESCRIBED HEREIN HAVE NOT BEEN AND WILL NOT BE REGISTERED UNDER THE U.S. SECURITIES ACT OF 1933, AS AMENDED (THE “SECURITIES ACT”), OR THE LAWS OF ANY STATE OF THE UNITED STATES, AND MAY NOT BE OFFERED OR SOLD WITHIN THE UNITED STATES, EXCEPT PURSUANT TO AN EXEMPTION FROM, OR IN A TRANSACTION NOT SUBJECT TO, THE REGISTRATION REQUIREMENTS OF THE SECURITIES ACT AND APPLICABLE STATE LAWS. A RATING IS NOT A RECOMMENDATION TO BUY, SELL OR HOLD ANY SECURITIES AND MAY BE SUBJECT TO SUSPENSION, REDUCTION OR WITHDRAWAL AT ANY TIME BY THE RATING AGENCY. FCA / ICMA STABILISATION APPLIES.