HONG KONG – In a bid to diversify its investor base and improve capital structure, the Airport Authority Hong Kong (AAHK) announced on Thursday that it has priced around $7 billion equivalent notes in three currencies and nine tranches, the largest bond offering ever from a Hong Kong issuer.

Financial pundits said this move will further reinforce the city’s status as a leading bond market in Asia.

According to the statutory body of the Hong Kong Special Administrative Region government, the notes were “well-received” by investors including sovereign wealth funds, asset managers, corporations, banks and insurance companies, with total orders surpassing the equivalent of $25.6 billion — an oversubscription rate of 3.7 times.

The package includes four tranches of three-year, five-year, 10-year, and 30-year bonds in Hong Kong dollars, with an interest rate ranging from 4.05 percent to 4.5 percent. Totaling HK$18.5 billion ($2.38 billion), this is the biggest ever public bond issuance in the city’s local currency, and the 30-year tranche is the longest bond maturity worldwide in Hong Kong dollars.

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The AAHK also sold 10-year and 30-year notes in renminbi worth 3.2 billion yuan ($440 million), and three tranches of US dollar bonds amounting to $4.15 billion. The US dollar notes were priced on Wednesday, following the pricing of those in Hong Kong dollars and renminbi on Tuesday.

“By introducing a bond structure that accommodates multiple currencies, we aim to attract a diverse investor base while optimizing our capital structure to support the continuous development of the airport,” said AAHK Chairman Fred Lam Tin-fuk. The notes in Hong Kong dollars will support the development of the city’s bond market, he added.

In multiple currencies, the bonds are easier for investors from different markets to access, which is conducive to raising more funds for the airport authority’s large-scale projects, said Billy Mak Sui-choi, associate professor of accountancy, economics and finance at Hong Kong Baptist University.

Mak said that what distinguishes this issuance is the introduction of ultra-long bonds spanning 30 years, which will further strengthen Hong Kong’s status as a leading bond market in Asia, while also demonstrating the long-term benefits of the city’s financial market to investors.

Bank of China (Hong Kong) is one of the joint lead managers of this issuance. Chen Mingchao, deputy general manager of the bank’s global corporate banking division, said, “The bonds have seen strong demand from institutional investors, indicating the strengths of Hong Kong as a global financial hub.”  

Bonds in Hong Kong dollars and renminbi are scheduled to be issued on Jan 14, and those in US dollars on Jan 15, with plans to be listed on the Hong Kong Stock Exchange.

The AAHK said in a statement that it has hit its fundraising target. It will use the net proceeds from the notes in Hong Kong and US currencies to refinance existing debt, and to fund its capital expenditure. The proceeds from the renminbi bonds will be mainly used for investment projects.

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The airport authority in recent years has invested heavily in several big projects. The three-runway system that went into operation in November cost HK$141.5 billion and took around 13 years to complete. Bank loans and bonds were one of its three major funding sources, and the other two were its retaining operating surplus and construction fee levied on departing passengers.

Also in November, the AAHK announced it would invest around 4.3 billion yuan to acquire 35 percent of Zhuhai Airport’s shares, with the aim of enabling passengers from Zhuhai, Guangdong province, and other cities in the Guangdong-Hong Kong-Macao Greater Bay Area to enjoy the global connectivity provided by the Hong Kong airport.

Against the backdrop, the airport authority has issued various types of bonds for both residents and institutional investors. Last January, for instance, it sold its first retail bonds of HK$5 billion. Then in May, it priced a 10-year note worth 1.5 billion yuan.

Contact the writer at irisli@chinadailyhk.com