A cross border team from global legal practice Norton Rose Fulbright has advised the Government of the Hong Kong Special Administrative Region of the People’s Republic of China (the “HKSAR Government”) on its inaugural Sukuk under the Government Bond Programme. The Sukuk, with an issuance size of US$1 billion and a tenor of five years, marks the world’s first US$ denominated Sukuk originated by an AAA-rated government.

The Sukuk saw strong demand from global investors and the tightest spread ever achieved on a benchmark US$ issuance from an Asian government (excluding Japan), setting an important new benchmark for Hong Kong and the rest of Asia.

The Sukuk uses an Ijarah structure, underpinned by selected units in two commercial properties in Hong Kong.  The Sukuk is issued by a special purpose vehicle, Hong Kong Sukuk 2014 Limited, established and wholly owned by the HKSAR Government and will be listed on the Hong Kong Stock Exchange, Bursa Malaysia (Exempt Regime) and NASDAQ Dubai.

Norton Rose Fulbright advised the HKSAR Government in relation to English law, Hong Kong law and US Securities law. HSBC and Standard Chartered Bank acted as Joint Global Coordinators, Joint Lead Managers and Joint Bookrunners, and CIMB and National Bank of Abu Dhabi acted as Joint Lead Managers and Joint Bookrunners for the Sukuk offering. Abu Dhabi Islamic Bank PJSC, Emirates NBD Capital, Hong Leong Islamic Bank Berhad, OCBC Bank Hong Kong Branch, QInvest and RHB Islamic Bank Berhad were also appointed as Co-Managers.

Gregory Man, Partner, commented: “The transaction represents a landmark transaction both for Hong Kong as well as for the Islamic finance industry in general. The success of the transaction is a testament to the legislative changes which have been made to accommodate Islamic finance in Hong Kong and demonstrates Hong Kong’s credentials as a potential global Islamic financial centre. We hope that the initiative of the HKSAR Government will encourage other Hong Kong issuers to explore similar opportunities”.

Davide Barzilai, Partner, commented: “We are delighted to have worked on this successful project having taken an active interest in the legislative process that led to this landmark Sukuk.  Now that the Hong Kong tax aspects of the Sukuk structure have been tested, we expect to see an increased level of interest in Hong Kong based Sukuk issuances.”

The team was led by Partner Gregory Man (Dubai) with support provided by Partner Davide Barzilai (Hong Kong); capital markets Of counsels Vicky Jones (Singapore), Allan Yee (Hong Kong) and Harold Tin (Hong Kong); senior associate Cynthia Teo (Singapore) and associates Grace Lo (Hong Kong) and Lydia Kungsen (Hong Kong).

Allen & Overy LLP advised the Joint Lead Managers and Co-Managers on English law, Hong Kong law and US securities law and also advised DB Trustees (Hong Kong) Limited as Delegate.