NBFCs broaden funding options
Bonds Indian regulators announce slew of measures to support shadow banksBY KRISHNA MERCHANTIndia’s non-banking financial
companies are looking to
diversify their sources of
funding after regulators relaxed
rules to boost liquidity for the
credit-starved sector.
TATA CAPITAL FINANCIAL
SERVICES is planning a debut
benchmark-size US dollar
bond issue this financial year,
which ends on March 31. It is
also eyeing US$100m from a
second overseas loan under its
external commercial borrowing
programme in the quarter
ending September.
“The dollar bond preparation
is at a nascent stage. We
are currently getting our
international ratings done,”
said Sandip Joshi, deputy vicepresident at Tata Capital. “We
will want to be ready in all the
avenues of fundraising and the
borrowing decisions will be
dependent on the prevailing
pricing dynamics at that
juncture.”
Tata Capital, a unit of the
vast Tata Group empire, has
already raised US$75m from
offshore loans this quarter. The
non-banking financial company
is targeting Rs41.26bn from a
second public bond issue after
it raised Rs33.73bn from a
maiden issue last year.
Meanwhile, SHRIRAM CITY UNION
FINANCE and SREI EQUIPMENT FINANCE
have commenced bookbuilding
to raise a combined Rs15bn in
the public rupee market, which
targets retail investors as well
as domestic institutions.NBFCs have struggled to
maintain access to the capital
markets after a series of defaults
and credit scares over the past
year, most recently involving
Dewan Housing Finance Corp.
The cost of borrowing,
however, has eased for NBFCs
with sound balance sheets and
strong parents since September
last year, when defaults at
Infrastructure Leasing &
Financial Services group rattled
the debt market.
The spreads over government
securities for high-rated NBFCs,
which spiked by 40bp–50bp
after these events have now
narrowed 30bp–35bp, Joshi
from Tata Capital said.
“Our incremental cost of
borrowing has come down
compared to September lastyear because the Reserve Bank
of India has been proactive
in cutting rates and the
government has announced
a slew of measures to boost
liquidity to the NBFC sector.”LIQUIDITY SUPPORT
The RBI has cut base rates
cumulatively by 110bp since
February to buttress the
economy and expand credit to
non-bank lenders.
Last week, India removed a
rule that obliged NBFCs to set
aside a quarter of the funds
raised from bonds to protect
investors against a possible
default, effectively making it
cheaper for them to raise debt.
The Debenture Redemption
Reserve requirement of 25% of
the value of outstanding bonds
has been scrapped for non-
banking financial companies and
has been reduced to 10% of the
outstanding debentures from
25% for unlisted companies.Property boost for China loans
Loans Commercial real estate acquisitions stand out in quiet marketBY APPLE LIA slew of Chinese commercial
property acquisitions is
providing welcome cross-
border lending opportunities
for international banks in a
market hit by the Sino-US
trade war and lower outbound
M&A activity.
International buyers are
raising around US$1.9bn
of syndicated loans to buy
commercial real estate,
mainly office buildings, after
China’s credit tightening
and clampdown on property
speculation forced some
domestic developers to
deleverage and sell assets.
Syndicated loan volume in
China fell to US$35.7bn in the
first six months of this year,
down 26% from US$48.4bn
in the same period of 2018,
reflecting the challenges facing
a slowing economy.
“Sponsor-backed real estate
financings still make up asignificant portion of our loan
pipeline, while other sectors
continue to stay dry,” said
a Hong Kong-based banker
specialising in leveraged and
acquisition financing.
Loans currently in
syndication include a
Rmb4.52bn-equivalent
(US$656m) borrowing for
Munich-headquartered ALLIANZ
SE and Shanghai-based D&J CHINA
and a US$390m-equivalent
facility for a consortium
comprising Boston-based AEW
and Beijing-headquartered HONY
CAPITAL.
A US$381m-equivalent
financing for Hong Kong-listed
SHUI ON LAND, Toronto-listed
MANULIFE FINANCIAL and state-
owned CHINA LIFE INSURANCE
(GROUP) closed last week.
The Allianz-D&J combo
is buying office and retail
properties in Beijing, while
the AEW-Hony consortium is
purchasing an office tower in
the Chinese capital. The ShuiOn Land-led group is acquiring
an office building in Shanghai.
Earlier this month, UK
developer CHELSFIELD teamed
up with a group of Hong Kong
and Malaysian investors to
purchase four office buildings
in Shanghai for Rmb1.5bn.
A loan of Rmb880.38m-
equivalent will back the
consortium’s purchase.
BROOKFIELD ASSET MANAGEMENT
is expected to raise a secured
loan of about US$1bn-
equivalent to back its proposed
acquisition of Greenland
Huangpu Center in Shanghai.
The Canadian asset manager
agreed in late March to
purchase the mixed-used
property project from Chinese
developer Greenland Hong
Kong Holdings.
Some domestic and
international lenders are
finding the loans appealing
and the risk manageable as
the deals carry collateral in the
form of quality commercialproperties in China’s biggest
cities.
“These investments are
mainly made in prime
locations in first-tier cities
such as Beijing and Shanghai,
targeting offices with stable
rental income, which are more
resistant to a market slump,”
said a second loans banker.
Recent activity adds to
US$10bn of property-related
lending in the first half of
the year, 18% higher than the
US$8.5bn raised in the same
period of 2018, according to
Refinitiv LPC data.
Chinese property loans
are also gaining attention
among non-bank investors. In
March, Singaporean developer
CapitaLand launched its first
China discretionary debt fund
with a target capital size of
US$750m. The CREDO I China
fund, set to be one of the
largest property debt funds in
China, will invest in offshore
US dollar-denominatedNews