HKMC’s pilot infrastructure loan-backed securities issuance

The Hong Kong Monetary Authorty (HKMA) has issued a press statement to announce that the Hong Kong Mortgage Corporation Limited (HKMC) has successfully completed its first issuance of infrastructure loan-backed securities through a special purpose vehicle called Bauhinia ILBS 1 Limited (Bauhinia 1). The issuance represents a significant milestone for the HKMC in establishing an infrastructure financing securitization platform in Hong Kong.
As Mr. Paul Chan, the Financial Secretary noted, the issuance of Bauhinia 1 aims to make the local infrastructure financing market more vibrant and diverse, attract market capital to high-quality infrastructure projects, and establish Hong Kong as a „premier overseas financing platform under the Belt and Road Initiative“.
Bauhinia 1 comprises a diverse portfolio of 35 project and infrastructure loans spanning 25 individual projects across 12 countries and 9 sectors, with a combined value of approximately US$404.8 million. Institutional investors can thereby get exposures in a broad range of project finance, infrastructure, and corporate loans across multiple geographies and sectors. The issuance has generated substantial interest from a variety of investors, including local and international financial institutions, insurance companies, asset management companies, and others.
The offering includes five classes of investment-grade rated notes, with a total principal of US$364.4 million, all of which are listed on the Hong Kong Stock Exchange. The HKMC serves as the sponsor, collateral manager, and risk retention holder of the transaction. Notably, within the capital structure of Bauhinia 1, „there is a US$100 million sustainability tranche (Class A1-SU) backed by sustainable, green, and social assets“. This tranche is issued in accordance with the HKMC’s Social, Green, and Sustainability Financing Framework, demonstrating the HKMC’s commitment to green and sustainable development in the Hong Kong financial market. The Asian Infrastructure Investment Bank participated in this issuance as an „anchor investor“, in line with its strategic priority of mobilizing private capital into the infrastructure sector.