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SCMP Reporter

WHEELOCK has mandated Chase Manhattan Asia and Societe Generale Asia to arrange a three-year $1.5 billion revolving short-term advance or note issuance facility, the first borrowing since its name change from World International.

  The proceeds of the facility will refinance Wheelock's existing $1.5 billion facility which will mature in March this year to provide continuing working capital.

  A revolving facility is a standby commitment by banks under which the borrowers' frequency of use cannot be guaranteed, and deals of this kind have not been popular with banks recently as they have numerous other lending options.

  ''To compensate for this, we will structure the deal so that banks' facility fee will be inversely proportional to the usage of the facility by the borrower,'' said Jackson Cheung, director of Societe Generale Asia, describing a new feature of the loan.

  When the borrower taps the credit line more often, the bank will lower the facility fee, and vice versa.

  The aim of the structure is to encourage the borrower to use more of the standby facility and to attract banks who may find the return from a revolving credit facility unattractive.

  ''Banks are more sensitive to their returns now. They are averse to granting a credit line to customers who do not use it enough,'' he said.

  Unlike other traditional syndicated loans which give participating banks a commitment fee based on the undrawn amount, the facility fee is calculated every six months using the total facility amount.

  ''But the interest margin for this new structure is slightly lower to adjust for the difference,'' Mr Cheung said.

  Besides the new facility fee, participating banks will also be given an option by the end of the third year to extend the facility annually up to five years.

  ''Given that the interest margin between a three-year loan and a five-year one can be as wide as 25 basis points, the renewable option is a much cheaper way of fund-raising for the issuer and a more flexible way for banks,'' said Virginia Poon, managing director of Asian capital markets at Chase Manhattan Asia.

  With the prevailing high interest rates and plentiful lending opportunities, banks wanted to achieve an optimal balance between the return and the tenure of the loan, she said.

  ''Unless the loan belongs to the project finance type, which means the tenure is fixed, a more flexible funding structure can be adopted for corporate loans used as working capital,'' she said.

  Wheelock's loan syndication will commence next week and is expected to close within two to three weeks.

  The company issued a $500 million seven-year bond in early November, with ABN-Amro Securities (Far East) as the book-runner and Goldman Sachs as the joint lead manager.

  Existing businesses within the Wheelock group include property development and investment, hotel and project management, infrastructure, retailing and distribution, services and trading.

      The redefined focus of Wheelock's current management is to further develop and expand its existing businesses to quickly grow into an entrepreneurial merchant house focusing on Hong Kong, East Asia and China.



Wheelock arranging $1.5b short-term revolving loan facility