Carving a mark in history, the government of Hong Kong successfully completed its maiden Sukuk offering on the 18th September 2014. The paper is the world’s first US dollar-denominated Sukuk originated by a ‘AAA’-rated government in the global Islamic financial market. Speaking to Yvonne Siew, a partner at Allen & Overy, and Louise Hennessey, a senior associate at the firm, NABILAH ANNUAR writes on the momentous issuance.
Having enacted its Sukuk law earlier this year, the government of Hong Kong Special Administrative Region of the People’s Republic of China (HKSAR government) announced that it expected to complete its Sukuk issuance in September. Accurately, the government successfully priced the five-year paper on the said date at a return of 2.005% per year. The Sukuk was well received by the financial community and was oversubscribed by 4.7 times.
The Sukuk was structured based on the Ijarah principle and utilized two commercial properties in Hong Kong. “After considering all possible structures for its inaugural Sukuk issue, the HKSAR government determined that an Ijarah structure would be the most appropriate structure, in line with the majority of sovereign Sukuk issuances to date,” said Siew. Through its maiden Sukuk, the government wished to demonstrate that the legal, regulatory and taxation frameworks in Hong Kong are well established to accommodate Sukuk issuances; with a hope to promote the further development of the Sukuk market in Hong Kong.
Assigned a credit rating of ‘AAA’ and ‘Aa1’ by S&P and Moody’s respectively, the landmark deal managed to attract interest from a diverse group of conventional and Islamic investors. According to Allen & Overy, the Sukuk program was allocated to over 120 global institutional investors, with 36% distributed to the Middle East, 47% to Asia, 6% to Europe and 11% to the US. 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.
The Government of Hong Kong Special Administrative Region of the People’s Republic of China Inaugural Sukuk
US$1 billion
18th September 2014
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Issuer/Trustee | Hong Kong Sukuk 2014 |
Obligor | HKSAR government |
Issuance price | US$1 billion (100%) |
Tenor | 5-year |
Periodic distribution rate | 2.005% per annum |
Currency | US dollar |
Maturity date | 18th September 2019 |
Joint global coordinators | HSBC and Standard Chartered Bank |
Joint bookrunners and joint lead nanagers | HSBC, Standard Chartered, CIMB Investment Bank and National Bank of Abu Dhabi |
Co-managers | Abu Dhabi Islamic Bank, Emirates NBD Capital, Hong Leong Islamic Bank, OCBC Hong Kong, QInvest and RHB Islamic |
Governing law | English Law and Hong Kong Law |
Legal advisors | Norton Rose Fulbright and Allen & Overy |
Underlying assets | Selected units in Wu Chung House, No. 213 Queen’s Road East, Hong Kong and Fairmont House, No.8 Cotton Tree Drive, Hong Kong |
Shariah advisors | HSBC Saudi Arabia, Standard Chartered, CIMB Islamic Bank and Shaikh Nedham Mohamed Saleh Abdulrahman Yaqobi |
Structure | Ijarah |
Face value / minimum investment | US$200,000 + US$1,000 |