Cash-strapped URA's $12b bonds twice oversubscribed

June Chen

The Urban Renewal Authority yesterday said its HK$12 billion bond offering was subscribed nearly two times over.

The offering is one of the largest Hong Kong dollar bond issuances, with a coupon rate between 3.35 and 3.55 percent.

It was URA's first foray in the Hong Kong dollar public institutional bond market since 2009.

The yields on the bonds are the lowest in the market in the past two- and-a-half years.

It is also one of the largest ever joint HKD bond offerings, and the largest ever 5-year and 10-year HKD tranches in Hong Kong's capital markets, according to the authority.

The proceeds from the offering will fund URA's capital expenditure on urban renewal projects and also be used for general corporate purposes.

The triple-tranche HK$12 billion bonds were offered under its US$3 billion (HK$23.38 billion) medium term note program. The offering comprises HK$4 billion three-year bonds with a 3.35 percent coupon rate, HK$5 billion five-year bonds with a 3.45 percent coupon rate, and HK$3 billion 10-year bonds carrying a yield of 3.55 percent.

The offering saw a peak combined order book of over HK$22.8 billion, representing a nearly double oversubscription.

The authority's head Chow Chung-kong said in July that it would issue bonds to raise funds as URA's latest cash flow reserve is HK$18 billion, and the authority will undertake the acquisition of five projects this year and next year, with an estimated acquisition expenditure of about HK$30 billion.

The URA was reported to have reached out to investors in Singapore and Macau for financial help a month ago, after it recorded a HK$3.9 billion deficit in the 2023-24 fiscal year, its second consecutive year of losses.

The investors for the bonds included banks, asset managers, corporations, insurance companies, hedge funds, central banks, official institutions, family offices and private banks.

Three years ago, the authority said it plans to deploy a record HK$100 billion to redevelop old buildings in five years to help first-home buyers by increasing housing supply.

Home prices are under pressure today due to high inventories in the primary market and it will take three more years to destock, according to consultancy Jones Lang LaSalle.

This month, the URA commenced a development project, KC-020, in Kowloon City which is expected to contribute an additional 11,830 square meters of domestic gross floor area, 2,360 sq m of commercial or retail facilities, and an ancillary car park to the combined urban renewal project.