Beijing Enterprises secures HK$2.1b loan
Beijing Enterprises Holdings, the investment arm of the capital's municipal government, has secured a HK$2.1 billion term loan from a group of six banks to cut interest expenses, people familiar with the situation say.
The five-year loan facility carried a tight margin of about 30 basis points above the Hong Kong interbank offered rate, one banker said, adding the company was forming a syndication for the deal.
'It should be at a tight side amid fierce fee competition,' the banker said. 'But it can help us maintain good relationships with big red-chip companies despite lower margins.'
Some observers suggested the firm might use cheap loans to fund its recent 11.6 billion yuan acquisition.
Beijing Enterprises agreed last month to acquire Beijing Gas from its parent for HK$11.6 billion, of which HK$4 billion would be paid in cash and the remaining HK$7.6 billion through the issuance of shares at HK$18.48 each.
The purchase price represents 1.3 times the company's price/book value this year and 24 times earnings last year and 15 times forward earnings, all cheaper than market expectations.
Beijing Gas is the monopoly supplier of natural gas in Beijing, serving 3.2 million residents and 19,000 commercial and 190 industrial customers.
'Beijing Gas is Beijing Enterprises' next leg of growth,' Goldman Sachs said in a research note as it upgraded the red chip's rating to buy from neutral.
Beijing Gas said earlier that its net profit fell 15 per cent to 480 million yuan last year despite an 18 per cent increase in sales to 6.01 billion yuan.
Apart from the anticipated acquisition, some analysts said the Beijing Olympics next year could be another growth driver for Beijing Enterprises.
'They could enjoy a so-called 'home-court advantage'. Investors outside China will only find domestic partners to explore the huge business potential of the Olympics, particularly in some sectors such as infrastructure and consumption,' said an analyst.
