Thirteen international schools in Hong Kong are said to have raised a total of HK$2.702 billion through bond issuances during the 2012-2013 school year, a capital-raising move that has prompted questions from some lawmakers.
As the Education Bureau has imposed no restrictions on bond issuance, some schools have even rolled out non-refundable bonds, Ming Pao Daily reported Wednesday.
The bonds are targeted at parents, as students are required to be covered by one of several classes of debentures once they gain admission to the schools.
According to the paper’s own research, the 13 not-for-profit international schools which issued bonds during the 2012-2013 school-year are estimated to have had assets worth HK$6.35 billion in total.
The schools are believed to have issued debentures with face values ranging from HK$40,000 to HK$10 million.
The fund-raising comes as international school places have been in high demand in Hong Kong. According to the Education Bureau, there could be a shortage of up to 4,200 school places at international schools in the 2016-2017 school-year.
The government has been encouraging the establishment of not-for-profit schools by allocating land plots and offering interest-free loans.
Ip Kin-yuen, legislator for the education functional constituency, questioned why many schools undertook large bond issuances despite the government’s provision of free land and interest-free loans. He urged the government to enhance its oversight on the schools.
Civic Party lawmaker Chan Ka-lok said international schools are becoming more commercial and some could be using a loophole in the existing regulations by charging parents fees via non-refundable bonds or bonds that will depreciate over time.
Among the international schools, the Kellett School in Kowloon Bay is said to have raised the most capital — HK$495 million — through bonds in the 2012/2013 financial year.
The school offers parents a choice of bonds ranging from HK$40,000 to half a million, all of which are non-refundable and will depreciate to a zero amount over a specified term. Meanwhile, it is also said to offer a HK$10 million bond, with 15-year tenor, that can be traded via the school.
The school was awarded a land plot in Kowloon Bay in 2008 and also pocketed a HK$204 million interest-free loan from the government.
The Australian International School is offering two types of non-refundable bonds, one at HK$100,000 and another at HK$3 million.
The Hong Lok Yuen International School and International College offers non-refundable bonds at either HK$65,000 or HK$100,000. All three schools mentioned above said the funds raised through bonds are used for school infrastructure projects, while school fees are used to support daily operations.
The Education Bureau said it is a common practice that international schools raise funds via various means. Parents are free to participate in any of the fund-raising exercises, it said, adding that investors will be able to recoup the face value of the bonds.
The bureau said that it has always urged school operators to hold consultations with parents and stakeholders.
Nine international school operating bodies are said to have entered into service agreements with the government, while some 41 schools have been submitting their books regularly to the Education Bureau for auditing.
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