Developers soak up excess cash as banks chase borrowers

Two property developers are tapping the loan market for a combined $8 billion to take advantage of excess liquidity in the banking system and keen competition from banks fighting for mandates.

Kerry Properties has invited banks to bid for shares in a $4 billion, five-year syndicated loan which will be used to refinance an earlier $4.5 billion, five-year revolving credit signed in January 2002, Basis Point reported yesterday.

A market source expected the structure of the deal to be similar to the original $4.5 billion financing, when 13 banks joined as co-ordinating arrangers, including Bank of China (HK), Bank of Communications (HK), Bank of East Asia, BNP Paribas, BOT-Mitsubishi, Standard Chartered, Hang Seng Bank, HSBC and others.

The banks and Kerry Properties are said to be negotiating a price slightly tighter than the 37 basis point premium that its parent, Kerry Holdings, is paying for a $5.4 billion five-year, two-tranche deal signed in August.

Meanwhile, Sun Hung Kai Properties is said to be tapping a club loan of $4 billion, with Bank of China (HK), Standard Chartered Bank among the three lenders approached by the developer.

The loan is expected to be used for funding land premiums of its Ap Lei Chau residential development, a joint development with Kerry Properties and Paliburg Holdings which comprise 316,000 sq ft of space on completion, and will likely be unsecured.