Investment-Grade Bond: MTR Corporation’s US$3bn hybrid
Perpetual motion
Hong Kong’s mass transit operator MTR Corporation proved its savviness in June with a US$3bn dual-tranche subordinated perpetual bond trade that came with a surprisingly high rating and drew huge demand.
MTR’s transaction, split evenly between a 4.875% perpetual non-call 5.5-year and a 5.625% perpetual non-call 10.5-year, followed a US$3bn triple-tranche senior bond from the issuer in March.
MTR did not have pressing financing needs to prompt such a quick return. Instead, it took a strategic look at its long-term capex plans and shifting markets in the wake of the US tariff announcements and rising Middle East tensions and decided to strike when the opportunity presented itself.
The choice to issue two tranches with different call dates was strategic, appealing to investors with different risk-return appetites.
The equity treatment of hybrid bonds allows MTR to maintain its ratings on par with the Hong Kong government. The majority state-owned company plans to spend about HK$140bn (US$18bn) on new railway projects, of which HK$20bn had been spent as of August 2025, and HK$65bn for the upgrade, replacement and maintenance of its existing railway assets. Support for MTR’s bonds was seen as a vote of confidence in the Hong Kong story, as the city ramps up its investment in development and infrastructure projects, including its Northern Metropolis.
The hybrid debut was rated A2/A (Moody’s/S&P), below MTR’s Aa3/AA+ (Moody’s/S&P) senior ratings. The ratings are the highest the two agencies have given globally for a US dollar subordinated corporate hybrid, helped by assumed Hong Kong government support.
Even though the notes were marketed as Reg S only, and it had raised US$3bn of senior notes in that market just three months earlier, MTR was able to print the biggest US dollar corporate subordinated perpetual securities issue from Asia ex-Japan. Combined peak books reached US$17.5bn, allowing 50bp of tightening from initial guidance in both tranches and a US$1bn upsize from the original target.
The non-call 5.5-year gave about 60bp of pickup over MTR’s senior bonds, and the non-call 10.5-year about 80bp, much tighter than the 100bp–150bp differential usually seen in the market. The notes will receive 50% equity treatment for their life from Moody’s and 50% from S&P until the first reset date.
Credit Agricole, HSBC, JP Morgan, Societe Generale and UBS were joint global coordinators, as well as lead managers and bookrunners with ANZ, Bank of China (Hong Kong), Barclays, DBS Bank, Deutsche Bank, Mizuho and Standard Chartered.
To see the digital version of this report, please click here
To purchase printed copies or a PDF, please email shahid.hamid@lseg.com