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Civic Party calls for clarification of URA Bond Issue
21/07/2009
Civic Party calls for clarification of URA Bond Issue
The Government has announced last month that the Urban Renewal Authority would issue bonds or medium-term notes to the market as part of its financing plan. In response to the significant concern in the community, CP has examined the issue in light of the current progress of urban renewal. CP expresses concern that the URA bond issue will or may prejudice the current Urban Renewal Strategy review, by pre-empting any future option of restructuring or abolition of the URA if that is the final consensus reached at the conclusion of the review. We believe that before the issue proceeds any further, it is essential for the Government to answer the following questions immediately so that the community can decide whether the issue is justified:
1. If future restructuring or abolition of the URA is needed, will the bondholders have any right to prevent restructuring or abolition of the URA under the proposed terms of the issue?
2. As the justification for the bond issue is “the unstable financial position that the URA may face in the next five years”, would public interest be better served if the funding shortfall is to be met by government loan or capital injection rather than bond issue?
3. As there is a significant community voice for an enhanced role by the URA – either reformed or reborn, to take up more social causes including conservation, rehabilitation and revitalization, in line with the purposes set out in section 5(a), (d) and (e) of the URA Ordinance for which the URA was established, will the government consider it prudent to delay any long-term financial commitment by the URA including the proposed bond issue?
4. Will the government position itself as a guarantor to the bond repayment? If yes, will the financing costs be lower if the government issues the bond and passes the funds to the URA? If not, will the bond-holders be entitled to the right of any implicit government guarantee which will complicate any future restructuring of the URA?