Norton Rose Fulbright advises on HK$600m embedded sustainability-linked loan facility

Global law firm Norton Rose Fulbright has advised a syndicate of banks, led by MUFG Bank, Bank of China (Hong Kong) and HSBC, on a HK$600m loan facility made available to Hong Kong-based industrials company Handsome Chemical Services Limited (HCSL). The facility is guaranteed by HCSL’s parent company, Yip’s Chemical Holdings Limited, a company listed on The Stock Exchange of Hong Kong Limited. MUFG Bank acted as the sole sustainability-linked loan structuring advisor.

The interest rate under the four-year facility can reduce based on HCSL’s performance against a number of pre-determined sustainability targets. The facility also includes a novel embedded interest rate swap which provides HCSL with flexibility to manage its interest rate exposure. 

The environmental performance targets include optimising production processes in connection with energy use and consumption of water and steam. The social commitment target relates to the provision of mobile eye surgery for cataract patients in mainland China. If HCSL achieves these targets, it will be eligible for interest rate savings.

Hong Kong banking and finance partner David Milligan led the Norton Rose Fulbright team which included senior associate Rex Chan. Singapore partner Colin Rice provided advice on derivatives-related aspects of the transaction.

David commented: “ESG-linked financing is gaining momentum and this transaction underscores the role of financial institutions in promoting sustainable development. The fact that this facility incentivises treatment of cataract patients in rural China demonstrates the potential of sustainable finance to create a positive social impact.”