Billboard advertising, press conferences, TV interviews, its own Web site: sounds more like the launch of a Hollywood blockbuster than a securitization deal. But that is exactly how the Hong Kong government's HK$6 billion (US$769.3 million) transaction backed by tunnel revenues is being marketed this week as the arrangers, HSBC Securities and Citigroup Global Markets, seek to broaden the investor base.

The joint-leads are calling Hong Kong Link 2004 the most widely distributed bond deal ever to come out of the SAR, and given the marketing effort, it is difficult to argue with that view. Aside from extensive advertising, the deal - the first Asian simultaneous securitization for retail and institutional investors - is listed on the Hong Kong Stock Exchange, enabling potential retail investors to buy bonds directly from stockbrokers or through online accounts.

In addition, 23 banks are involved on the retail syndicate - on which HSBC is sole bookrunner - with more than 800 branches selling the bonds. Retail buyers have the option of buying three-, five- and seven-year fixed-rate bonds with coupons of 2.75%, 3.6% and 4.28%.

This offers investors a pickup of around 100 basis points on prior straight government retail bond offerings. "It was important to give retail buyers a healthy spread on previous deals, with this being the first retail securitization and also to get them closer to the institutional pricing," a banker at one of the leads told ASR.

The banker said that the institutional tranches - a HK$450 million one-year bullet and a 12-year floating-rate piece with an expected average life of 3.4 years - would price toward the end of the week. Half of the floating-rate tranche is hedged to fixed rate, to reduce exposure to interest rate volatility.

The banker added it was too early to talk about indicative price levels, but with 200 clients - both foreign and local - showing up at the investor presentation, he was confident of a successful execution.

The structure is rated AA+', Aa3' and AA-' by Fitch Ratings, Moody's Investors Service and Standard & Poor's, respectively. It is now known that - should toll rates change or revenues decline - a direct government payment is triggered to compensate for any shortfall in cashflow. Additional credit enhancement will come from a HK$230 million reserve fund.

Copyright 2004 Thomson Media Inc. All Rights Reserved.

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