Hong Kong’s rail operator MTR sells US$1.2 billion green bond, the largest in the city

14 Aug, 2020 04:25
source: Singularity Financial

Singularity Financial Hong Kong August 14, 2020 – Hong Kong’s rail operator, the MTR Corporation, has sold a 10-year green bond worth US$1.2 billion in a move seen as an attempt to alleviate the financial damage wreaked upon it by the Covid-19 pandemic.

The MTR Corporation said late on Wednesday that it had issued the largest green bond ever offered in the city, under its US$5 billion debt issuance programme, the second time in four years it had tapped into green finance.

The Reg S 10-year deal was priced at 98.695% with a coupon of 1.625% to offer a yield of 1.768%. This was equivalent to a spread of 108 basis points over the US treasuries, which was at the tight end of the final price guidance of 110bp area (+/- 2bp), and 42bp inside of the initial price guidance of 150bp area.

The transaction was well oversubscribed with an order book of over US$3.75 billion, enabling the rail operator to tighten the pricing. Strong demand was seen from a diverse group of institutional and green investors in Hong Kong and the rest of Asia, as well as in Europe.

The rail giant noted there was strong demand from a diverse group of institutional and green investors in Hong Kong, Asia and Europe.

MTR’s CEO Jacob Kam Chak-pui said the move further reflected its commitment to the environment and sustainable community development. “The sustainability journey is a never ending one, but MTR shall continue to explore playing an active role and making further contributions,” he said.

The rail operator recorded net losses of HK$334 million (US$42.8 million) in the first six months of 2020, from a profit of HK$5.5 billion in the same period last year – its worst performance since going public two decades ago.

Kam admitted earlier that the overall financial impact of the Covid-19 pandemic was HK$5 billion on the company’s recurrent business, and the outlook was hazy.

Together with subsequent green finance arrangements, MTR has raised HK$16.8 billion (US$2.17 billion) so far, funding projects that improve energy efficiency, enhance railway service and conserve nature. These projects include the Kwun Tong line extension, South Island line, replacement of air-cooled chillers in the MTR network, installation of energy storage equipment in a depot and ventilation building, and conservation of the Lok Ma Chau wetland, which is managed by MTR.