(Bloomberg) -- Hong Kong’s Urban Renewal Authority is set to obtain a HK$13 billion ($1.7 billion) five-year loan with a group of banks, according to people familiar with the matter, marking the authority’s first syndicated facility in over a decade.
The quasi-government entity, which redevelops projects in the city’s older neighborhoods, could sign the loan as early as this week, the people said, asking not to be named discussing a private matter. The facility pays an all-in yield of 68 basis points over the risk-free Hong Kong interbank offered rate, said the people.
The facility, which was syndicated to the market at an initial size of HK$6 billion, ended up more than doubling following an over-subscription, the people said, as banks hunt for high quality assets amid a shortage of deals in the region. Asia ex-Japan loan volume declined 21% to $402 billion so far this year, Bloomberg-compiled data shows.
URA, which is rated AA+ by S&P Ratings, said it doesn’t have further information to provide at the moment, in response to a Bloomberg email inquiry.
URA’s latest loan comes amid Hong Kong’s prolonged property slump, where home prices have declined more than 6% this year and is now close to the lowest level in eight years. Also, the value of mortgages in the special administrative region that have exceeded the worth of homes jumped to the highest level in more than two decades due to steep borrowing costs.
This has hurt URA’s profitability as it had to sell projects at a loss. The authority recorded a net deficit of HK$3.9 billion for the financial year 2023/24, according to its annual report. But it’s an almost-certain likelihood of government support for the borrower, if needed, according to an S&P Ratings report in August.
The loan, once signed, would push URA’s total borrowing to at least HK$25 billion this year. The authority had sold three-, five-, and 10-year bonds totaling HK$12 billion in August at yields of between 3.35% to 3.55%.
(Updates with URA comment)
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