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The Hong Kong Mortgage Corporation Limited (HKMC) is pleased to announce today (October 2) the launch of a new issue of retail bonds that will be placed to investors through an enlarged group of Placing Banks.
The HKMC signed the Placing Bank Agreement with Bank of China (Hong Kong), The Bank of East Asia, Chiyu Bank, Citibank, CITIC Ka Wah Bank, Dao Heng Bank, HSBC, Hang Seng Bank, International Bank of Asia, Nanyang Commercial Bank, Shanghai Commercial Bank, Standard Chartered Bank and Wing Lung Bank at the signing ceremony held this afternoon. The HKMC also entered into an Underwriting Agreement with The Bank of East Asia, Citigroup, Standard Chartered Bank, Bank of China (Hong Kong), HSBC, CITIC Ka Wah Bank, Wing Lung Bank, Dao Heng Bank and International Bank of Asia for an aggregate amount of HK$1,595 million.
The arrangement introduced by the HKMC in October 2001 has proved to be highly effective in placing bonds to retail investors. The HKMC has issued HK$4.4 billion of retail bonds to around 12,000 investors since October 2001. Using this placing mechanism, 15 banks and companies have raised over HK$19 billion through issuance of retail bonds and certificates of deposit since the beginning of 2002.
The new issue will adopt the same offering mechanism (see Technical Brief at Annex 1 which is on the HKMA website http://www.hkma.gov.hk). It will also contain the following key features that will bring additional benefits to retail investors:
(a) Enlarged Placing Bank network: to reach out to more retail investors, the number of Placing Banks will be increased to 13 for the new issue. The number of designated bank branches for processing applications will also be increased to 625 branches. In addition, retail investors can make use of the phone and/or Internet banking facilities of some Placing Banks to subscribe for the retail bonds.
(b) More choices on structure and return: to give retail investors more choices in bond products for portfolio diversification and return enhancement, the new issue will be divided into three tranches. The HKMC will introduce one new structured product in addition to a fixed rate bond of 3-year maturity and a 2-year extendable for 3-year note (see Annex 2 for details which is on the HKMA website http://www.hkma.gov.hk). The new fixed-inverse floating rate note carries a 5.5% fixed-rate coupon for the first year followed by a semi-annually determined floating rate coupon at 6% minus 6-month interbank rate with a minimum coupon of 0.5% (see Annex 3 for details which is on the HKMA website http://www.hkma.gov.hk). The new product offers retail investors a high upfront coupon in the first year, and potential yield enhancement compared with a five-year fixed-rate bond.
(c) Reliable market making arrangement: the 13 Placing Banks are committed to quoting firm bid prices for the retail bonds during business hours until the maturity date. This will ensure that retail investors can liquidate their holdings at any time. To ensure the ability of the Placing Banks to quote offer prices, the amount to be available to support secondary market making activities is 30% of the initial issued amount. The placing banks are also committed to quoting firm offer prices until the reserve amount is exhausted and will continue to do so on a best effort basis afterwards.
The coupons of the three tranches are as follows.
Tenor Coupon per annum
(payable semi-annually)
3-year 2.7%
2-year extendable for 3-year note 3.3%
5-year fixed-inverse floating rate note 5.5% for first year,
thereafter 6.0% minus
6-month HIBOR, with a
minimum coupon of 0.5%
An investor may subscribe for one or more of the above tranches. The actual subscription price for Tranche A Notes and Tranche B Notes will be determined by reference to the relevant Exchange Fund Notes as specified in the Prospectus. Subscription price for Tranche C Notes is set at 100% of the principal amount of the Notes.
The subscription period will commence at 9:00 a.m. on October 3 2002 (Thursday) and end at 2:00 p.m. on October 11 2002 (Friday). The timetable for the issue is set out in Annex 4(which is on the HKMA website http://www.hkma.gov.hk). As applicants need to have a bank account and an investment account with the placing banks they intend to instruct, they are encouraged to submit their applications early and not to wait until the closing date of the subscription period. The subscription money will only be deducted from the applicant's account on the closing date.
Retail investors who are interested in subscribing for the retail bonds can obtain the prospectus from the offices of the HKMC and the 625 designated branches of the 13 Placing Banks (see Annex 5 which is on the HKMA website http://www.hkma.gov.hk), and the HKMC's website at www.hkmc.com.hk.
Mr. Peter Pang, Chief Executive Officer of the HKMC, said, "the HKMC's retail bond programme has a proven track record of providing retail investors with high quality debt securities of a secure and stable return. This new issue is a clear demonstration of the HKMC's strong commitment to further develop the retail bond market. The wider selection of product structure and yield provides many choices to suit the investment objectives of portfolio diversification and yield enhancement of retail investors under the current market conditions."
End/Wednesday, October 2, 2002
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