Hong Kong – HKMA’s Pilot Bond Grant Scheme And Other Bond Market Initiatives.

Eligible issuers 

First time issuers that have not issued bonds in Hong Kong in the five-year period between 10 May 2013 and 9 May 2018 (both dates inclusive). 

The term “issuer” means the entity issuing a bond and the entity’s associates. The term “associate” refers to a person or corporation (i) over which the issuer has control; (ii) which has control over the issuer; or (iii) that is under the control of the same person or corporation as the issuer. In addition, arrangers of PBGS bonds are not eligible as issuers of PBGS 

Current feedback from the HKMA indicates that PRC state-owned enterprises will not necessarily be “associates” merely due to their ownership by the State-owned Assets Supervision and Administration Commission (SASAC) or other PRC government entities. However, they may be treated as “associates” if they are held under intermediate corporate common ownership. 

Issuers and lead arrangers are encouraged to consult the HKMA if there is any uncertainty on application of the PBGS 

Eligible issues 

The bonds must: 

• • be issued in Hong Kong; 
• • have an issue size of at least HK$1.5 billion (or equivalent in foreign currency); 

Eligible grant amount 

The grant amount for each bond issue is equivalent to half of the eligible issuance expenses, up to the following limits: 

• • HK$2.5 million where the bond, its issuer or its guarantor(s) possess a credit rating by a rating agency recognised by the HKMA; or 
• • HK$1.25 million where none of the bond, its issuer or its guarantor(s) possess a credit rating by a rating agency recognised by the HKMA. 

Each eligible issuer can apply for a grant for two bond issuances at most. 

Eligible issuance expenses include: fees to Hong Kong based (i) arrangers; (ii) legal advisers; (iii) auditors and accountants; (iv) rating agencies; (v) external green reviewers (in the case of green bonds) and SEHK listing fees and CMU lodging and clearing fees. 

Expenses covered by another grant scheme(s) in Hong Kong or overseas are ineligible. 

The rating agencies recognised by HKMA are: Fitch Ratings, Moody’s Investors Service, Rating and Investment Information, Inc, and Standard and Poor’s Ratings Services. 

Current feedback from the HKMA indicates that a bond issue would include the setting up of a programme as well as the initial drawdown thereunder. In addition, printer, trustee and agent costs will not be included as eligible issuance expenses for now 

Commencement date 

The commencement date will be announced in due course, subject to the completion of legislative process for the 2018-19 Budget. The PBGS will be valid for a period of three years. 

Status of the legislative process for the 2018-19 Budget: the draft Appropriation Bill was passed on 10 May 2018. Formal assent of the Bill into Hong Kong law is expected shortly and is expected to take effect from 10 May 2018 

Application process 

Issuers and lead arrangers may request PBGS application forms from the HKMA via pbgs@hkma.gov.hk. Application can be made before launch of an eligible bond transaction but it can also be made up to three months after the issue date of the bonds. 

The HKMA expects lead arrangers to provide assistance to their clients in completing the application form as appropriate and may submit the form to the HKMA on their behalf. 

Issuers and lead arrangers are encouraged to consult the HKMA at an early stage of the bond issuance process about the PBGS application.