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|| Middle East investors subscribed to 36% of Hong Kong $1 billion Sukuk

hk-dubai.jpgHong Kong government announced the successful offering of its $1 billion Sukuk to global investors, with 36% of the Sukuk distributed to the Middle East investors.

Following a global roadshow commencing 1 September 2014, covering Riyadh, Dubai, Abu Dhabi, Doha, Kuala Lumpur, Hong Kong, Singapore, London and New York, the Sukuk (a form of Islamic Bond) was allocated to over 120 global institutional investors. (In Dubai the Sukuk is expected to be listed on NASDAQ Dubai). The Sukuk saw strong demand from global investors, attracting orders exceeding $4.7 billion and recording over-subscription of 4.7 times.

To see listing and contact emails of institutional investors from the Middle East, check our 2014 edition of Middle East Investors Directory

More details follows from the Hong Kong Monetary Authority

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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 inaugural sukuk (the “Sukuk”) under the Government Bond Programme.

The Sukuk, with an issuance size of US$1 billion and a tenor of 5 years, marks the world’s first USD-denominated sukuk originated by an AAA-rated government.

Following a global roadshow commencing 1 September 2014, covering Riyadh, Dubai, Abu Dhabi, Doha, Kuala Lumpur, Hong Kong, Singapore, London and New York, the Rule 144A/Reg S USD Sukuk was priced on 10 September 2014 at 2.005% (23 basis points over 5-year US Treasuries). The Sukuk saw strong demand from global investors, attracting orders exceeding US$4.7 billion and recording oversubscription of 4.7 times, allowing final pricing to tighten by 7 basis points from its initial price guidance. Pricing at a spread of 23 basis points over the corresponding yield of US Treasuries represents the tightest spread ever achieved on a benchmark USD issuance from an Asian (ex-Japan) government, setting an important new benchmark for Hong Kong and the rest of Asia.

The deal attracted interest from a diverse group of conventional and Islamic investors. The Sukuk was allocated to over 120 global institutional investors, with 36% of the Sukuk distributed to the Middle East, 47% to Asia, 6% to Europe and 11% to the United States. By investor type, 11% was distributed to fund managers, 56% to banks and private banks, 30% to sovereign wealth funds, central banks and supranationals, and 3% to insurance companies.

“We are pleased to see such strong demand for the HKSAR Government’s inaugural Sukuk, as evidenced by the significant orderbook size and tight pricing. The Sukuk marks the first USD sukuk originated by an AAA-rated government in the global Islamic financial market and signifies an important milestone in the development of the Islamic capital market in Hong Kong,” the Financial Secretary of Hong Kong, Mr John C Tsang, said.

Mr Tsang added, “The success of this transaction demonstrates that issuance of sukuk using Hong Kong’s platform is a viable fund-raising option and widely accepted by investors around the world. I hope that the Sukuk issuance will catalyse the further growth of the sukuk market in Hong Kong by encouraging more issuers and investors to participate in our market.”

The Sukuk issuance comes after the legislative changes made in Hong Kong in July 2013, which provide a taxation framework for sukuk issuances comparable to that for issuances of conventional bonds.

The strong investor demand for the Sukuk is a testament of investor confidence in Hong Kong’s credit strengths and strong economic fundamentals. The Sukuk was assigned credit ratings of AAA by Standard and Poor’s and Aa1 by Moody’s.

The Sukuk uses an Ijarah structure, underpinned by selected units in two commercial properties in Hong Kong. The Sukuk is issued by a special purpose vehicle, Hong Kong Sukuk 2014 Limited, established and wholly owned by the HKSAR Government. The Sukuk is expected to be settled on 18 September 2014 and listed on the Hong Kong Stock Exchange, Bursa Malaysia (Exempt Regime) and NASDAQ Dubai.

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
11 September 2014


DISCLAIMER:

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. 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 UNITED STATES 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. THERE WILL BE NO PUBLIC OFFERING OF SECURITIES IN THE UNITED STATES. ANY PUBLIC OFFERING OF SECURITIES IN THE UNITED STATES BY THE HKSAR GOVERNMENT WOULD BE MADE BY MEANS OF A PROSPECTUS THAT WOULD CONTAIN DETAILED INFORMATION ABOUT THE HKSAR GOVERNMENT, INCLUDING CERTAIN STATISTICAL AND OTHER ECONOMIC DATA. 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.



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