(Bloomberg) -- Two Hong Kong bodies that work closely with the government are in rare talks with banks in the financial hub for syndicated loans, according to people familiar with the matter.

The Hong Kong Housing Society and the Urban Renewal Authority are in initial discussions with banks over possible loans, said people familiar with the matter, asking not to be identified discussing non-public matters while details of the loans, including the facility sizes and their tenors, are still under negotiation. The Housing Society has recently mandated eight banks for its potential syndicated loan, added one of the people.

The Hong Kong Housing Society is a nongovernmental organization that is a major provider of the city’s public housing. The Urban Renewal Authority is a quasi-governmental entity that redevelops and reconstructs projects in older urban areas. Both have received financial support from the Hong Kong government, according to their 2023 annual results.

The two groups’ interest in syndicated loans comes amid a slump in Hong Kong’s residential and commercial real estate market that has increased pressure on the city’s finances. Hong Kong’s financial secretary in February said the budget deficit for the financial year ending March 31 was projected at HK$101.6 billion ($13 billion), almost double the initial estimate. Hong Kong recently removed cooling measures on housing to boost the market, which helped prices tick up in March for the first time in almost a year. 

The Urban Renewal Authority, in an email reply, said that it has started exploring external financing through various channels due to an expected cash-flow gap in the coming years. Loan syndication is one of the options under consideration and the financing plan is expected to be implemented in the third quarter of this year, it added.

The Housing Society told Bloomberg News in an email that it is considering “various financing options including syndicated loans, and is holding discussions with some banks” to cope with an expected peak in construction projects in the next few years. 

The Housing Society saw a 35% jump in its expenses in its 2022-2023 fiscal year, primarily due to write-offs related to property price declines, its annual report shows. The organization said in February that it is planning a bank loan of at least HK$1 billion to address cash-flow deficits. It recorded a HK$1.8 billion deficit at the end of fiscal 2023, citing a challenging operating and investing environment. 

The Urban Renewal Authority said in its 2022-2023 annual report that headwinds in the local property market due to higher interest rates and rising construction costs weighed on the group’s revenue. The group added that its cash reserves of around HK$23.6 billion weren’t enough to cover upcoming expenses.

The Hong Kong Airport Authority, meanwhile, is also in talks with lenders to refinance its 2020 five-year syndicated loan of HK$35 billion ($4.5 billion), according to people familiar with the discussions. The loan will partly be used to help finance a runway expansion project, one of them said. 

Another government-related body, the West Kowloon Cultural District Authority, which oversees a development for art museums and concert halls built on reclaimed land, signed a HK$5 billion sustainability-linked syndicated loan with banks last month, according to Bloomberg-compiled data. It received a HK$4 billion loan from nine banks in 2022, the authority said in a statement at the time. 

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