The MTR Corporation with publicly available financial information.
Read the following article ‘Hong Kong MTR sells US$1.2 billion green bond, largest issued in the city, after Covid-19 crisis leads to its worst financial performance in two decades’.
Hong Kong MTR sells US$1.2 billion green bond, largest issued in the city, after Covid-19 crisis leads to its worst financial performance in two decades Hong Kong’s embattled rail operator has sold a 10-year green bond worth US$1.2 billion in a move seen as an attempt to alleviate the financial damage wreaked upon it by the Covid-19 pandemic. The MTR Corporation said late on Wednesday that it had issued the largest green bond ever offered in the city, under its US$5 billion debt issuance programme, the second time in four years it had tapped into green finance. The corporation said the issuance was oversubscribed with an order book of over US$3.75 billion, allowing the final issue price to tighten by 0.42 per cent from the initial price guidance. ‘Being the largest green bond issued from Hong Kong, the success of the issuance indicates that the corporation’s green strategy has been well endorsed by international investors, who are willing to lend support to the sustainability of our businesses,’ said MTR Corp’s finance director Herbert Hui. MTR’s CEO Jacob Kam Chak-pui said the move further reflected its commitment to the environment and sustainable community development. ‘The sustainability journey is a never ending one, but MTR shall continue to explore playing an active role and making further contributions,’ he said. Green bonds are a type of fixed-income financial instrument created to fund projects that have positive environmental benefits. The rail operator recorded net losses of HK$334 million (US$42.8 million) in the first six months of 2020, from a profit of HK$5.5 billion in the same period last year — its worst performance since going public two decades ago. First is green bond in 2016, together with subsequent green finance arrangements, the MTR Corp has raised HK$16.8 billion so far, funding projects which improve energy efficiency, enhance railway service and conserve nature. They included the Kwun Tong Line Extension, South Island Line, replacement of air-cooled chillers in the MTR network, installation of energy storage equipment in a depot and ventilation building as well as conservation of the Lok Ma Chau Wetland, which is managed by MTR. Carrying a coupon rate of 1.625 per cent per annum payable semi-annually with a maturity date of August 19, 2030, the new green bond was priced at 98.695 per cent face amount with an overall yield of 1.768 per cent. The bond is expected to be rated ‘AA+’ and ‘Aa3’ by Standard & Poor’s and Moody’s Investors Services respectively, both on a par with the sovereign ratings of the Hong Kong government.
Source: Abridged from Yau, C (2020) ‘Hong Kong MTR sells US$1.2 billion green bond, largest issued in the city, after Covid-19 crisis leads to its worst financial performance in two decades’, South China Morning Post, 13 August.
Answer the following question.
Question 1 (60 marks) :
Critically appraise the above news article and submit a written report. The report should focus on the MTR Corporation with publicly available financial information, and relate to the topic on sources of long-term financing. Write no more than 500 words (please provide a word count). The report should cover knowledge of theories, analysis of concepts, company background, issues and recommendation, research evidence and the organization’s efforts.
Sample Solution
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