Hong Kong's Civil Aviation Department issues 55 billion Hong Kong dollars worth of bonds, setting a new record for Hong Kong's largest public bond issuance.

The Airport Authority Hong Kong has just completed the issuance of 3 currencies totaling $7 billion, setting a record for the largest public bond issuance in Hong Kong by an issuer. In addition to the $18.5 billion HKD bond and 3.2 billion RMB "dim sum" bonds rumored in the market yesterday, this issuance also involves a total of $4.15 billion USD in bonds. Market reports indicate that the peak order volume for the Airport Authority's bond issuance reached $25.6 billion USD (nearly $200 billion HKD), which is 3.7 times the issuance size. The Hong Kong dollar bonds from the Airport Authority were issued in 4 tranches, ranging from 3 years to 30 years, with a size of $18.5 billion HKD (approximately $2.4 billion USD), with orders reaching a peak of over $33.8 billion HKD. The offshore RMB bonds were issued in two tenors, with a total size of 3.2 billion RMB (approximately $400 million USD), with orders reaching over 9.5 billion RMB. The USD bonds were issued in three tenors, with a total size of $4.15 billion USD, with orders peaking at $20 billion USD. The various notes issued include: - $10.5 billion HKD of 4.05% 3-year notes - $4.5 billion HKD of 4.10% 5-year notes - $2.1 billion HKD of 4.25% 10-year notes - $1.4 billion HKD of 4.50% 30-year notes - 2 billion RMB of 2.85% 10-year notes - 1.2 billion RMB of 3.40% 30-year notes - $1.3 billion USD of 4.75% 3.5-year notes - $1.85 billion USD of 4.875% 5.5-year notes - $1 billion USD of 5.125% 10-year notes Compared to the 3.83% face interest rate of the $4 billion HKD 3.5-year public bonds issued by the Airport Authority in early 2024, this year's bond interest rates have increased slightly, mainly reflecting the rise in U.S. Treasury interest rates. The Airport Authority stated that the net proceeds from the issuance of HKD and USD bonds will be used to refinance existing debt, allocate for capital expenditures, and other general corporate purposes. The net proceeds from the RMB bonds will mainly be used for capital injections into investment projects and other general corporate purposes. The issuance of the Airport Authority bonds includes refinancing, capital expenditures, and new investment plans such as investment in the Zhuhai Airport. Through the introduction of multi-currency bond structures, the Airport Authority aims to attract a more diversified investor base while improving its capital structure to support the continuous development of the airport. The introduction of multi-currency bond structures by the Airport Authority has been well received in the busy Asian primary bond market, with many large transactions. Li Zhengguo, Vice Chairman of the Global Investment Banking Division of UBS, mentioned that the size and subscription response of the Airport Authority's issuance are impressive. Yang Yongcheng, Executive Director of the Asian Debt Financing Division of UBS Global Investment Bank, stated that considering the increase in issuance size compared to the Airport Authority's bond issuance earlier this year, the final yield and the interest rate spread with U.S. Treasuries have remained relatively stable, reflecting international investor demand. UBS indicated that participating investors in this issuance include asset managers, corporations, sovereign wealth funds, insurance companies, etc., not only from Asia, but also from asset management companies in the U.S. and sovereign wealth funds in the Middle East. Yang Yongcheng mentioned that U.S. Treasury yields have recently risen significantly, but believes that many companies have become accustomed to higher interest rates and are no longer waiting for rates to fall as they were one or two years ago. They will issue bonds based on business needs. For example, many technology companies have issued convertible bonds recently, and in 2025 and 2026, many issuers will have re-financing needs. Alan Yang, Head of Capital Markets, Greater China and North Asia at Standard Chartered, stated that the Airport Authority successfully completed its first institutional HK dollar issuance and long-term offshore RMB issuances last year, opening up more attractive financing channels and laying the foundation for this record-breaking transaction. Over the past five years, the total issuance of HK dollar bonds in the market has increased by 55% to reach a record high of approximately $240 billion HKD by 2024, reflecting growing investor interest in HK dollar bonds. Standard Chartered believes that the success of the Airport Authority will encourage more issuers in Hong Kong and other regions to consider issuing local currency bonds, while consolidating Hong Kong's position as an international financial center.