Hong Kong is moving forward with its plan to securitize revenue from five government toll roads and one bridge, having settled on which banks will arrange the deal. Citigroup Global Markets and HSBC Securities won the assignment.
Frederick Ma, the secretary for financial services and the treasury, said he is hoping the transaction is ready for market by the end of April.
Although the exact size is yet to be announced, the deal is expected to raise as much as HK$6 billion, which would help the government contend with a huge budget deficit.
Annual net revenue from the tolls is about HK$1 billion, Ma said in a prepared statement. The government plans to schedule HK$600 to HK$700 million per year
for repayment of principal and interest, he said.
It is the first time the Hong Kong government will be using securitization to raise money. But other deals might follow, perhaps as soon as later this year.
According to reports, Hong Kong intends to privatize or securitize HK$112 billion of assets over the next five years. Among the possibilities on the table are its interests in commercial property and car parks.
Talk of securitizing the tunnel and bridge revenue began last summer. And in November, the government appointed HSBC as a financial advisor to help with structuring the transaction. Including Citi on the deal - a surprise to some observers - is seen as a good move to help boost distribution among retail investors.
Ma said a major goal of the toll-road transaction would be to further develop the local bond market - which includes getting retail investors involved.
The preparations that are underway - in part to make the deal feel more accessible to the everyday investor - include designing a Web page that will provide the latest information concerning the operation and revenue from the five tunnels and the Lantau Link (which is comprised of the Tsing Ma Bridge, Ma Wan Viaduct and Kap Shui Mun Bridge).