Clifford Chance

Clifford Chance advises on Hong Kong's first infrastructure-backed CLO sponsored by HKMC

Leading international law firm Clifford Chance has advised ING, MUFG and Standard Chartered Bank as joint global coordinators, joint bookrunners and joint lead managers on Bauhinia ILBS 1 Limited's US$404.8 million pilot project finance and corporate infrastructure collateralised loan obligation (CLO) cash flow securitisation transaction, sponsored by The Hong Kong Mortgage Corporation Limited (HKMC).

The transaction marks the first infrastructure loan backed CLO sponsored by HKMC, the first issued out of Hong Kong by a Hong Kong incorporated orphan special purpose vehicle, and the first such transaction listed on the Hong Kong Stock Exchange. The transaction also includes a sustainability tranche backed by eligible loans under HKMC's Social, Green and Sustainability Financing Framework.

Clifford Chance advised the joint global coordinators on all aspects of the transaction, from inception to completion, which included advising on English, Hong Kong and US securities law.

The project involved a multi-disciplinary team led by Hong Kong based partners Francis Edwards and Dauwood Malik and Foreign Legal Counsel Lin Lu with expertise in securitisation, capital markets and project financing, with support from associate Greg Chan as well as partners and lawyers from our global network.

A separate Clifford Chance team led by London-based partner Bruce Kahl with support from senior associate Andrew Whelan and associate Micah McDonald advised DB Trustees (Hong Kong) Limited as the trustee.

Francis Edwards who led the transaction said, "We'd like to congratulate HKMC, ING, MUFG and Standard Chartered Bank on this landmark transaction. We are proud to support HKMC's pilot project finance and infrastructure CLO in Hong Kong which mobilises institutional capital to finance infrastructure projects across various host countries, helps HKMC recycle capital for such projects and consolidates the vital role of Hong Kong as an infrastructure financing and securitisation hub and international financial centre."

This is the very first infrastructure-backed securitisation transaction in Hong Kong. The Hong Kong-originated CLO has a material international impact, especially as infrastructure CLOs are a relatively new asset class and a developing product globally. The portfolio in this particular transaction initially comprises 35 project finance and corporate infrastructure loans in respect of 25 projects which are located across 12 countries in Asia-Pacific, the Middle East, and South America and diversified across 9 industry subsectors.

HKMC is a company wholly owned by The Government of the Hong Kong Special Administrative Region of the People's Republic of China (Hong Kong Government) through the Exchange Fund.

This transaction won a number of awards at the FinanceAsia Achievement Awards 2023 including Best Bond Deal, Best Infrastructure Deal and Best Structured Finance Deal in Hong Kong SAR. It was also featured as "Deal of the Month" by FinanceAsia.