The Hong Kong Mortgage Corporation ( HKMC ) has completed the issuance of its third infrastructure loan-backed securities ( ILBS ) as it continues to develop this asset class and raise Hong Kong’s profile as an infrastructure financing hub.  

Executed through the Hong Kong special purpose vehicle Bauhinia ILBS 3 Limited ( Bauhinia 3 ), the deal builds on similar issuances in 2023 and 2024, offering professional investors exposure to a diversified portfolio of project and infrastructure debt across multiple geographies and sectors.

The Bauhinia 3 issuance generated another strong response from investors, both from new and repeat investors, with growing demand from investors outside Asia. The expanded investor base is well-diversified, including asset managers, corporates, family offices, financial institutions, insurers, private banking, and security firm investors.

The Asian Infrastructure Investment Bank ( AIIB ) continued to support the HKMC’s ILBS offering as an anchor investor through its US$300 million investment programme, which mobilizes private capital into the infrastructure sector.

HKMC executive director and chief executive officer Colin Pou says the latest transaction demonstrates HKMC’s continued commitment to ILBS and support for the development of Hong Kong as an infrastructure financing hub. “The ongoing strong demand from new and existing investors shows that investor interest continues to grow and they increasingly recognize the benefits and diversification this asset class brings,” he adds.

Five classes 

Bauhinia 3 has a portfolio of 33 project and infrastructure loans across 28 individual projects in 12 countries and nine sub-sectors, with a total value of approximately US$450.5 million. In total, five classes of notes are issued ( Class A1-SU, Class A1, Class B, Class C, and Class D ), with an aggregate principal of US$427.9 million. There is also an unrated subordinated tranche amounting to US$22.6 million.

The issued notes are listed on the Hong Kong Stock Exchange.  The quality of the portfolio and increasing investor interest in ILBS allowed the HKMC to issue Class D at non-investment grade ( Ba1 ), amounting to US$16 million – the first of its kind in Asia – which further enhanced the efficiency of the capital structure.

Within the capital structure of Bauhinia 3, there is a US$117 million sustainability tranche ( Class A1-SU ) backed by sustainable, green, and social assets. Rated Aaa by Moody’s Ratings, Class A1-SU is issued in accordance with the HKMC’s social, green and sustainability financing framework, which aligns with the Green Bond Principles, Social Bond Principles, and Sustainability Bond Guidelines released by the International Capital Market Association ( Icma ).

Standard Chartered is the sole global coordinator for the transaction as well as a joint bookrunner along with BNP Paribas, China International Capital Corporation Hong Kong Securities, ING Bank ( Singapore ), and MUFG Securities Asia. Fubon Bank ( Hong Kong ) acted as the co-manager.

HKMC is the sponsor, collateral manager, and risk retention holder of the transaction.