Offshore buying spree sparks boom in loans
As mainland companies embark on a spate of acquisitions, global banks are positioning themselves for a slice of the lending market
Mainland firms are in the middle of an offshore acquisition binge, which is pushing up syndicated loan volumes.
Issuers including entities incorporated in Hong Kong have taken on US$25.6 billion in loans for acquisitions in the year to date, according to Thomson Reuters. That is twice the amount seen for all of last year, previously the peak year.
Mainland loans represent about half of all merger and acquisition loans in the Asia-Pacific, excluding Japan. In the past, Chinese firms would account for only 3 or 4 per cent while Australian and Indian firms were much more active. Bankers expect this trend to accelerate next year.
"For many years, the China offshore loan market did not matter. But with this M&A activity, with companies diversifying their financing with offshore capital raisings via loans and bonds, this is the year the market has come of age," said Amit Khattar, Deutsche Bank's Asian head of loan capital markets and syndications.
Banks involved in M&A loans in China also look at ancillary business
The business is a major boon to banks. Institutions that offer acquisition loans position themselves for a batch of lucrative ancillary work, such as arranging the bond that will take out the loan, perhaps an initial public offering, and performing all the treasury and trade services the enlarged firm will require.