International Financing Review March 21 2020 57LOANS ASIA-PACIFICHANGZHOU ZHONGCE RUBBER
NETS NINEAutomotive tyres manufacturer HANGZHOU
ZHONGCE RUBBER has closed its US$250m four-
year loan, after attracting nine lenders that
joined in general syndication.Standard Chartered was the original
mandated lead arranger, bookrunner and
underwriter of the deal, while China
Construction Bank (Asia) joined as an MLAB prior
to the launch of syndication. Industrial and
Commercial Bank of China (Asia) also joined at the
top as an MLAB during general syndication.Mandated lead arrangers are Bank of China,
China Minsheng Bank, Commerzbank, Shanghai
Pudong Development Bank and Bank of Hangzhou.
Lead arranger is China Everbright Bank.
Arrangers are Fubon Bank and BNP Paribas.
The four-year amortising loan paid top-
level all-in pricing of 136.28bp based on anVirus to test Aussie lending
AUSTRALIA Market gravitates towards short-term funding amid turmoilThe coronavirus outbreak is redrawing the
boundaries in Australia’s syndicated loan market
as lenders face up to their biggest test since the
global financial crisis.
In recent years, rising competition from
foreign rivals and institutional investors has
driven innovative financing structures beyond
the local market’s traditional five-year sweet
spot, challenging Australian banks’ dominance
in market share.
But the pendulum might now be swinging
back in favour of domestic banks as the recent
spike in volatility limits access to long-term
funding and due to the aggressive terms that
borrowers have been able to obtain from some
foreign banks and direct lenders.
“Borrowers pushing boundaries on tenors
or terms would probably be brought back to
shorter tenors and more traditional covenant
structures because banks are going to become
more conservative for the next little while,” said
Gavin Chappell, head of syndications Australia
at ANZ.
“My advice would be to be more prudent and
consider a more traditional five-year loan.”
The market share of domestic banks in
mandated lead arranger league tables for
syndicated and club loans in Australia fell for the
fourth straight year to 32% in 2019, according to
Refinitiv LPC data. That compares with a 54%
share in 2015.
Over the same period, Chinese lenders raised
their share to 16% from 3.8%, while the share of
Japanese banks grew to 15.8% from 11.7%. Non-bank lenders tripled their share to 2.2% from
0.7% (see chart).
While the impact from the coronavirus is
clearly more pronounced in certain sectors, such
as travel, bankers are waiting to see if foreign
banks will retreat again to their home markets
this time.
“One big driver in the market is how different
banks are going react when we have some
borrowers and sectors that are challenged,” said
ANZ’s Chappell.
“If there are banks that are exposed
domestically and offshore to borrowers in stress
or facing defaults, does that mean they are
going to pull out of particular markets and focus
more on their core businesses?”
“It’s too early to say and it remains to be seen,
but we have seen some banks retreat in the
past during challenging times, and it wouldn’t
surprise me if they did this time,” he said.PILING IN
New entrants from China and Japan, two of
Australia’s largest trading partners, have been
piling in to do business Down Under.
Japan’s Sumitomo Mitsui Trust Bank set up a
representative office in Sydney last September.
China Everbright Bank opened its first Australian
branch in Sydney early last year, following China
Merchants Bank’s entry in 2018.
State-owned Bank of China, which topped the
bookrunner league tables for syndicated loans in
Asia-Pacific in 2019, made its mark in Australia
too with third and ninth rankings in the MLA and
bookrunner tables, respectively.
“Bank of China has a long history in the
Australian market and has become more
active in recent years in underwriting and
bookrunning deals,” said Sydney-based Henry
Fung, managing director of corporate banking
and national head of syndication at the Chinese
lender.
“We are definitely looking to underwrite more
deals and lead more transactions as MLAB.
We are also building up our team to expand
origination and distribution capabilities.”
It is not just the Asian banks that were drawn
to Australia for its strong sovereign rating, and
a stable and transparent regulatory framework.
Intesa Sanpaolo and Credit Industriel etCommercial are among those seeking branch
licences in the country, following Societe
Generale, which reopened a branch in Sydney in
May last year.
The French bank, which began operating
in Australia in 1981, had cancelled the name
registration for the branch in mid-2012 in the
aftermath of the eurozone crisis.DEALS DRYING UP
Any lenders looking to grow their Australian
business, however, are likely to find fewer big-
ticket opportunities, as the coronavirus-induced
economic downturn deters companies from
raising funds for new investments.
Several asset sales have already been put
on the back-burner, including those of Downer
EDI’s mining services business and Brookfield’s
stake in Dalrymple Bay Coal Terminal. In early
February, Melco Resorts & Entertainment pulled
the plug on a stake purchase in Crown Resorts.
Syndicated loan volumes from Australasia
totalled US$3.9bn in January–February
compared with US$6.34bn in the same period
last year, according to Refinitiv LPC data. That
follows a 14% year-on-year slump to US$87.6bn
in 2019 loan volumes.
While Australian banks are well capitalised,
they are not immune to the challenges their
foreign peers face for funding stemming from
virus-induced volatility. This was evident in the
domestic debt markets earlier this month after
Macquarie Bank and National Australia Bank
both pulled Additional Tier 1 perpetual offerings
due to market turmoil.
Australian authorities ramped up their
financial response last week amid fears the
virus pandemic may tip the country into its first
recession in nearly three decades.
Frank Mirenzi, vice-president at Moody’s
Investors Service, said the coordinated policy
measures are credit positive for Australian
banks, as they enable access to stable funding
and liquidity, and promote credit availability to
the economy.
“The credit profiles of Australian banks
also remain robust, with capital and liquidity
in a much stronger position heading into this
downturn than during previous crises,” he said.
Source: Refinitiv LPC Mariko Ishikawa010,00020,00030,00040,00050,00060,00070,00080,00090,000100,0002015 2016 2017 2018 2019
Australia Asia North America
Europe Non-banks OthersVIRUS TO TEST AUSTRALIAN LENDING
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