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As part of the implementation of the Hong Kong government’s plans to promote bond issuances in Hong Kong and to enhance Hong Kong’s competitiveness in the international bond market, the Hong Kong Monetary Authority (HKMA) announced on 10 May 2018 further details of the three-year Pilot Bond Grant Scheme (Scheme) as promulgated in the 2018-19 Budget, being one of the initiatives to attract local, Mainland and overseas enterprises to issue bonds in Hong Kong.
The key details of the Scheme are summarised below:
1. What types of issuers are eligible for the Scheme?
Eligible issuers must be “first time” issuers, which means issuers that have not issued bonds in Hong Kong in the five-year period between 10 May 2013 and 9 May 2018. It should be noted that the term “issuer” includes the entity issuing a bond and its associates which covers the entity’s subsidiary, parent company or fellow subsidiary under the common control of the same company.
2. What are the criteria of eligible bond issues?
Eligible issues must:
3. How much is the grant amount?
The grant amount for each bond issue (up to two bond issues per issuer) is equivalent to half of the eligible issuance expenses, up to the following limits:
4. What kinds of expenses are eligible to be covered by the grant amount?
The following expenses are eligible issuance expenses:
Expenses covered by another grant scheme(s) in Hong Kong or overseas are ineligible.
5. When will the Scheme commence? How and when to apply?
The Scheme will be valid for a period of three years. The commencement date of the Scheme will be announced in due course.
Issuers and lead arrangers may request for application forms for the Scheme from the HKMA via pbgs@hkma.gov.hk and provide relevant supporting documents within 3 months after a bond’s issue date.
6. What are the key differences between the Scheme and the Asian Bond Grant Scheme in Singapore?
The Monetary Authority of Singapore implemented on 9 January 2017 the Asian Bond Grant Scheme (Singapore Scheme) to promote bond issuances in Singapore.
Below is a brief comparison of the two schemes:
|
The Singapore Scheme |
The Scheme |
Eligible issuers |
The issuer must be a first time Asian company (with global headquarters in Asia) or non-bank financial institution |
No requirement on the location of the headquarters of the issuer; the Scheme also applies to an issuer which is a bank |
Grant per issuer |
One time only |
Up to 2 bond issues |
Tenor |
Only applicable to issues with a tenor of at least 3 years |
No tenor requirement |
Currency |
The bonds must be denominated in an Asian local currency or USD, EUR or JPY |
No currency requirement |
Minimum issue size |
S$200 million (or its equivalent) |
HK$1.5billion (or its equivalent) |
Upper grant limit |
|
|
Revenue from issue |
More than half of the gross revenue from arranging the issue is attributable to the “Financial Sector Incentive” companies in Singapore |
No similar requirement |
Conclusion
The launch of the Scheme is certainly welcomed by market participants and is expected to attract more companies to raise capital through bond issuances in Hong Kong, thereby boosting the local bond market and further enhancing Hong Kong’s position as an international financial centre.
If you want to know more about the Scheme or bond issuances in Hong Kong generally, please contact our debt capital markets partner, Kevin Tong.
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