MTR Corp has tapped the debt market for HK$2.35 billion by issuing fixed-rate notes to take advantage of the low-interest climate. Arranged by HSBC Markets, the notes comprise a three-year tranche of HK$850 million, a five-year tranche of HK$1 billion and a seven-year tranche of HK$500 million. MTR claimed the fixed-rate Hong Kong dollar note issue was the largest of its kind in Hong Kong in recent years. It said it had arranged to swap a substantial portion of the proceeds into floating rate funding at 'very attractive levels'. The proceeds will be used for general corporate purposes such as financing new capital expenditure and refinancing maturing debt. Helen Wong, head of Greater China's debt capital market of HSBC, said the notes were well-received. Analysts broadly believed the note issue was favourably timed for investors and the issuer. Head of Dao Heng Markets Tam Ping-shing said the existing long-term interest rate was lower than short-term interest rates. 'This situation, which is unseen for a long time, is mainly because the market does expect a few more rounds of interest rate cuts,' he said. Mr Tam expected the MTR note issue would usher similar issues by other corporations in the near future. Andrew Fung Hau-chung, treasurer of the Commonwealth Bank of Australia, said demand for fixed income products was strong, fuelled by the launch of the Mandatory Provident Fund in December. 'Some surveys show a large number of employees remain conservative on investing their provident fund contribution. As a result, most of them chose investment options which are mainly invested in bonds and debt products,' he said. 'The MTRC is well-positioned to feed the demand [for] quality debt instruments because of its sound credit rating.' MTR's rating is equal to Hong Kong's sovereign rating, which was upgraded last week by rating agency Standard and Poor's. The long-term local-currency sovereign rating was raised from A-plus to AA-minus, the highest Standard & Poor's has assigned the SAR. 'It's a timely deal,' Mr Fung said. He pointed out that yields on the MTR notes were reasonable in comparison with similar issues such as Exchange Fund notes. The MTR's three-year notes carry an annual coupon of 5.35 per cent, its five-year notes 5.83 per cent and seven-year notes 6.12 per cent. The note issue will help fund the MTR's three-year, HK$24.3 billion investment programme to 2002, providing capital for the airport railway project, the Tseung Kwan O Line, property development and other capital investments. The MTR intends to raise HK$22.4 billion in the period between last August and the end of next year.
