2020-04-04 IFR Magazine

78 International Financing Review April 4 2020

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Coronavirus rocks APAC lending

„ ASIA Syndicated loans fall to eight-year low in Q1

Syndicated lending in Asia-Pacific slumped to

an eight-year low in in the first quarter as the

coronavirus pandemic took its toll, with several

countries imposing lockdowns and a range of

business activities grinding to a halt.

Loan volumes in Asia-Pacific (ex-Japan)

dropped 39% to US$68.92bn in the first quarter

from US$113.79bn a year earlier, while deal flow

shrank to 221 from 377 loans completed in the

same period, according to Refinitiv LPC data.

This was the lowest quarterly tally since the

first quarter of 2012, when lending slumped to

US$62.21bn from 231 deals in the aftermath of

the 2011 eurozone crisis.

“Overall, the market has been off to a really

slow start and the outlook for Q2 is uncertain

and changing by the day,” said Bryan Liew,

regional head of loan syndications for ASEAN at

Standard Chartered Bank in Singapore. “We will

see more caution and maybe asset repricing.”

Every market across the region posted

declines, with Singapore being the worst-hit

• nose-diving by more than 84% year-on-year
  to US$1.09bn in Q1. Faced with an uncertain
  outlook, some borrowers have sought covenant
  amendments or waivers from lenders, and many
  have shelved fundraisings, cancelled acquisitions
  and cut capital expenditure.
  The leveraged buyout of New Zealand-listed
  dental service provider Abano Healthcare Group
  is among the deals that have been called off,
  along with a NZ$190m (US$107m) five-year loan.
  Companies in the hardest-hit aviation,
  tourism and hospitality sectors have rushed to
  renegotiate terms and draw down on credit lines.
  MGM China Holdings asked lenders in February
  to waive the leverage covenants on a HK$9.75bn
  (US$126m) loan for the next 12 months after
  Macau’s government closed all casinos for 15
  days that month.
  Still, bankers note that the bank loan market
  has shown its resilience in previous crises, and
  some expect frequent bond issuers to turn to
  loans while capital markets remain volatile.
  “The coronavirus-induced market volatility will
  create a heightened focus for all corporates on
  what their funding strategy is going to be for the
  next 12 months,” said Gavin Chappell, head of
  syndications, Australia at ANZ in Sydney.

“I think we will see some transactions that

couldn’t have been done in other markets come

into the bank market.”

NOT ALL GLOOM AND DOOM

Massive fiscal and monetary stimulus packages

across the world are cushioning the impact for

some borrowers.

“As perception of credit risk goes up, so too

should credit spreads,” said Ashish Sharma,

head of loan syndications Asia-Pacific at HSBC in

Hong Kong.

“But as interest rates have come down, and

given quantitative easing by a number of central

banks, some of the stronger borrowers may see

their overall interest costs come down with the

significant decline in benchmark rates, even if

their credit spreads go up.”

It is not all gloom and doom, however, with

event-driven financings providing the silver

lining.

Thailand’s Charoen Pokphand Group is raising

a bridge loan of about US$7.5bn for its proposed

acquisition of Tesco’s Asian business, the largest

from the South-East Asian country. Freeport

Indonesia is preparing to launch a US$2.8bn

five-year loan for a copper smelter in East Java

into general syndication. Vodafone Hutchison

Australia and TPG Telecom are forging ahead

with a A$5.25bn loan for their proposed merger.

“We often see a polarisation effect during

times of market disruption – strong credits in

stable sectors continue to receive support from

their relationship banks, while weaker credits

or those in volatile sectors may struggle to

raise financing or see their terms become less

competitive,” said Andrew Ashman, head of loan

syndicate Asia-Pacific at Barclays in Singapore.

StanChart’s Liew is also optimistic on the

region’s prospects and expects a pick-up in

activities from the third quarter.

“Fundamentally, the outlook in Asia remains

intact, with three of the largest economies –

China, India and ASEAN – all in growth mode

and several at the start of industrialisation,” he

said.

Mariko Ishikawa

Additional reporting by Chien Mi Wong

and Apple Li

9 IFR Loans 2327 p 75 - XX.indd 78 03 / 04 / 2020 19 : 26 : 35