Henderson taps loan market for HK$5b funding

PUBLISHED : Tuesday, 19 May, 2009, 12:00am
UPDATED : Tuesday, 19 May, 2009, 12:00am

Henderson Land Development is tapping the syndicated loan market for a HK$5 billion facility, taking advantage of the low-interest-rate environment, market sources said.

The developer sent out invitations yesterday inviting banks to make commitments to the facility, arranged by Henderson itself.

The company will pay an all-in interest fee of 125 basis points above the Hong Kong interbank offered rate (Hibor) for the three-year term loan, according to the sources.

Henderson will use the funds to refinance, at lower interest rates, loans that mature in 2011.

The deal has drawn a mixed response, after Henderson sounded out the market for more than a month. Local lenders and note-issuing banks are the biggest supporters, while foreign banks are more cautious because of the tight margin.

The credit market has seen a healthy improvement over the past three months, but foreign lenders are still suffering high funding costs in their operations.

'Most foreign banks have to pay about 100 basis points above Hibor for short-term capital in the interbank market, and it is not easy for them to get approval from their headquarters to join a deal with such a thin margin,' said a banker at a European bank. 'Not many banks are willing to underwrite the deal unless they want to take the opportunity to build a relationship with the borrower.'

Henderson declined to comment on the transaction.

The deal is expected to be the first blue-chip syndication loan in the city this year.

Despite limited support from foreign lenders, the size of the loan has been increased by two-thirds from an initial HK$3 billion because of the overwhelming response from several key industry players, including HSBC Holdings and Bank of China.

Those big names enjoy low funding costs because their networks of branches throughout the city provide them with a huge sum of deposits.

'We're still in the game and we've been hungry for good names for quite a long time,' said a local banker. 'We are sitting on a hoard of cash, but the local loan market was really quiet over the past 12 months.'

Wilson Wan, a vice-chairman of the Asia-Pacific Loan Market Association, said the Hong Kong syndication loan market had yet to fully recover, but pricing was now very attractive.

'Local blue chips such as Henderson or Cheung Kong (Holdings) paid only about 50 basis points a year ago for a five-year loan, but now they have to pay at least 120 basis points to get the deal done,' Mr Wan said.

He believed the deal would draw a strong response, since most lenders had built a solid relationship with the developer for a long time.