9 August 2017
Clifford Chance leads on first wave of capital issuances for financial institutions under new regulatory regime in Hong Kong
Leading international law firm Clifford Chance has advised on the first two issuances of securities designed to meet new capital standards for financial institutions in Hong Kong. These transactions, a Tier 2 subordinated note issuance by Chong Hing Bank Limited and a dated subordinated capital note issuance by China Life Insurance (Overseas) Company Limited, Hong Kong Branch, marked the first time that financial institutions in Hong Kong had issued securities under the new Financial Institutions (Resolution) Ordinance (FIRO) came into effect on 7 July 2017.
The Chong Hing Bank transaction involved an exchange offer to the holders of the bank's existing Tier 2 subordinated notes due 2020 and the issuance of US$383 million of new Tier 2 subordinated notes. The China Life Insurance (Overseas) transaction involved the issuance of US$225 million of subordinated capital notes due 2027.
Partner Matt Fairclough, who worked on both transactions, commented "FIRO is the most recent development to bring Hong Kong regulation of financial institutions in line with the FSB's key attributes for effective resolution and the requirements of Basel III. We were very pleased to have been able to work with our clients and their structuring and financial advisers to develop products to enhance their capital base in line with these new requirements and international standards implemented in Hong Kong."
Connie Heng, Partner and Head of Capital Markets, Asia Pacific, who led the China Life Insurance (Overseas) transaction, said "These two transactions highlight Clifford Chance's lead in the regulatory capital space in Asia Pacific and our ability to advise on the most innovative transactions in the market. We have been heavily involved in the consultation process around FIRO and so were in an ideal position to advise on these market first deals. To combine one of the issuance with a liability management exercise was also crucial to deliver the client's objectives of capital efficiency, and our experience in this product enabled us to deliver this."