Clifford Chance has continued to help the Hong Kong government raise funds in an effort to cut its budget deficit by advising on its inaugural global bond offering.

Capital Markets partner Stephen Roith [pictured] led a CC team, which included US securities partner Jon Zonis and counsel David Poureshagh, acting for arrangers and joint global coordinators HSBC, Merrill Lynch and Bank of China Group on the HK$20bn (US$2.56bn) debut offering.

CC partner Patrick O'Connor led a team advising Bank of China (Hong Kong) as trustee for the retail bonds.

The transaction was due to close at the end of July and consisted of a US$-denominated issue of 10-year notes to be offered to institutional investors pursuant to Rule 144A and Regulation S under the US Securities Act; a HK$-denominated issue in two tranches of five-year and 15-year notes to be offered to institutional investors pursuant to Regulation S; and a HK$-denominated retail issue in two tranches of two-year and four-year bonds to be offered to Hong Kong retail investors.

The bonds of all three offerings will be listed on the HKSE.

Roith described the offering as "a huge success for Hong Kong", adding: "Accessing three different markets simultaneously in two currencies is an ambitious and challenging way for a new sovereign issuer to make its debut in the bond markets."

In early May, CC helped the Hong Kong government close its first ever securitisation - acting for the underwriters on the HK$6bn securitisation of toll revenues generated by government-owned bridges and tunnels. At the time of the closing, team leader Roith said: "This landmark transaction will hopefully open up the Hong Kong retail bond market for other complex offerings in the future."

These offerings are part of a HK$21bn (US$2.69bn) fundraising effort by the Hong Kong government to cut its budget deficit, which stood at HK$40.1bn (US$5.14bn) for the year ending 31 March 2004. This has been projected to increase to HK$42.6bn for the present fiscal year.

The Hong Kong government is desperate to avoid a possible downgrade by ratings agencies if its deficit spirals out of control, and has set the target of balancing its books by 2009.

Other measures taken to tackle the deficit include increasing air-passenger departure tax from HK$80 to HK$120. First proposed in Hong Kong's 2003/2004 Budget, this was later endorsed by the Legislative Council and came into effect on 9 January this year. It is hoped this will generate an additional HK$400m (US$51.29m) a year in government revenue without hindering tourism.