Asian firms go on funding binge
Jump in M&A activity helps drive surge in syndicated loans in the region, with average deal size reaching US$372m in first five months of the year
The last time Asian syndicated loans were this big, Bill Clinton was the United States president and the iPod had not been invented.
The average deal size in the Asia-Pacific region outside Japan was US$372 million in the first five months of this year. That is the highest for the period since 2000, as the top four borrowers, including Macau casino operator Sands China and Malaysian group SapuraKencana Petroleum signed more than US$20 billion of loans between them.
Maturing Asian companies are taking advantage of the narrowest bank-loan interest margins in four years to grow by acquisition and refinance large slices of existing debt.
Merger and acquisition activity in the Asia-Pacific region jumped 60 per cent to US$325.6 billion this year, helping syndicated lending volumes swell to US$161 billion, the most for a first five-month period since 2011.
"In Asian loans, a billion dollars has become the new hundred million," said Ashish Sharma, the head of Asia-Pacific syndication at Credit Suisse Group in Hong Kong. "Companies considered mid-cap a few years back have become much larger enterprises, and commensurately, their funding requirements for capex and acquisitions have increased significantly."
While just US$54 billion of syndicated loans were completed in the region during 2000, the largest was a US$12 billion facility for Doncaster Group to help finance the acquisition of Hong Kong Telecom.
About US$14.2 billion of loans are now being marketed in syndication in the region, with US$7.8 billion in the pipeline. The consortium taking Chinese online game developer Giant Interactive Group private, led by the company's chairman and an affiliate of Baring Private Equity Asia, had attracted five lenders to its US$850 million facility with about five others seeking approvals, sources said.
Malaysia's MISC, the world's second-largest shipper of liquefied natural gas, planned to boost the size of its seven-year loan to US$1.5 billion from US$700 million as 12 banks sought to join the club facility, another source said last week.
"We remain quite optimistic in terms of Asia's loan volumes in the second half," said Atul Sodhi, the chairman of the Asia Pacific Loan Market Association.
"We'll continue to see cross-border acquisitions from Asian corporates, especially from China," said Sodhi, who is also the head of global loan syndications at Credit Agricole Corporate & Investment Bank in Hong Kong.
The biggest loan in the region this year backed the development of Australian billionaire Gina Rinehart's Roy Hill iron ore mine. The US$7.2 billion debt package, a record for Australian mining, was signed in March and comprised loans and guarantees from five export credit agencies and 19 banks, according to a March 20 statement from Roy Hill Holdings.
Sands China, a unit of Sheldon Adelson's Las Vegas Sands, signed a two-tranche US$4.39 billion facility in March that refinanced existing debt, while SapuraKencana agreed on a four- tranche US$4.99 billion deal that month to help refinance funds used for its two most recent acquisitions.
While merger activity in Malaysia and Thailand fell in the first five months of this year compared with a year earlier, Chinese deals were up 74 per cent to US$117.5 billion.
Australian activity during the period climbed 150 per cent to US$62.5 billion and Hong Kong deals more than tripled to US$23.6 billion.
"We expect an uptick in M&A financing this year," Sharma said. "Funding isn't a constraint for the right client and deal. They can fund their deals from loans, bonds and the US term loan B market for acquisitions. A bridge loan can be taken out quickly by a loan, bond or equity issuance."
Thai retailer CP All signed an 81.9 billion baht (HK$19.3 billion) facility in March to help repay a bridge loan for its acquisition of Siam Makro last year, the country's biggest takeover.
