COUNTRY REPORT HONG KONGequivalent 364-day loan the borrower raised
in October last year.
Far Eastern International Bank and
KGI Bank were the MLABs on that 2017
borrowing, which comprised a HK$1.36bn
term loan tranche A and a HK$1.36bn
revolving credit tranche B.
Tranche B can be drawn in either Hong
Kong or US dollars. The facility offered a
top-level all-in pricing of 235bp based on a
margin of 215bp over Hibor or Libor.
Separately, investment holding firm
Huarong Investment Stock, another
unit of state-owned China Huarong
Asset Management, is in the market for
a HK$3bn 364-day loan. Credit Suisse
is the MLAB of that loan, which can be
denominated in Hong Kong or US dollars.
The margin is 220bp over Hibor/Libor.
Lenders are being offered a top-level all-in
pricing of 260bp via a participation fee of
40bp.
› CHINA EVERBRIGHT UNIT TAPS CLUB
A unit of CHINA EVERBRIGHT GROUP is in the
market for a HK$4bn club loan, adding to
a US$790m aircraft financing for another
subsidiary.
A Hong Kong-based subsidiary of
the Chinese state-owned financial
conglomerate is raising the five-year club
loan from four Chinese lenders. Agricultural
Bank of China Hong Kong branch , Bank of China
(Hong Kong) , Bank of Communications Hong
Kong branch , and Industrial and Commercial
Bank of China (Asia) will each provide
HK$1bn.
Signing is slated for later this month
with the drawdown expected in September.
Meanwhile, CHINA AIRCRAFT LEASING GROUP
HOLDINGS , partly owned by one of the group’s
units, is also in the market for a US$790m
six-year loan to fund the purchase of 18
airplanes.
Credit Suisse, Goldman Sachs, Societe Generale
and Shanghai Pudong Development Bank are the
mandated lead arrangers and bookrunners,
while China Everbright Bank, Credit Agricole CIB
and Industrial & Commercial Bank of China (Asia)
joined as MLAs.
The deal offers a top level all-in pricing
of 230bp via an interest margin of 210bp
over Libor.RESTRUCTURING
› CW GROUP LIQUIDATORS NAMEDJoint provisional liquidators have been
appointed by the Grand Court of the
Cayman Islands to oversee the debt
restructuring of Hong Kong-listed CW GROUP
HOLDINGS.
Gordon MacRae and Eleanor Fisher of
Kalo Cayman, as well as Osman Mohammed
Arab of RSM Corporate Advisory Hong
Kong, were named as JPLs under a court
order dated August 7 in response to the CW
Group’s application. The JPLs will also take
control of all the company’s subsidiaries
and other entities, except for CW ADVANCED
TECHNOLOGIES.
The appointments will stay all legal
actions against the company unless
approved by the Cayman Grand Court.
Provisional liquidators were appointed by
the Hong Kong High Court in mid-July for
Singapore-based subsidiary CWAT, which
triggered an event of default following its
failure to redeem an outstanding S$55.25m
(US$41m) 7% bond on June 25.HKBN-WTT merger to increase loan margin
Loans HKBN to pay at least 65bp more in interest due to higher leverageHong Kong-based broadband and telecom
services provider HKBN ’s proposed merger
with peer WTT Holding Corp is likely to push
up its leverage and the pricing on a HK$4.1bn
(US$524m) loan after the completion of the
transaction.
The combined firm will have an adjusted
debt-to-Ebitda ratio of around 4.2x or higher,
according to estimates from rating agencies,
which will push up the interest margin on the
five-year bullet loan by at least 65bp.
Moody’s estimated in a report on Monday
that the merged firm will have an adjusted
debt/Ebitda of around 4.2x. Fitch said last
Friday that the adjusted net leverage would
be around 4.5x–4.7x in 2020.
That means that after the completion
of the merger, HKBN would need to pay a
margin of at least 170bp over Hibor on the
loan, which was amended and extended in
May.
Through the A&E exercise, HKBN reduced
the opening margin to 105bp over Hibor from
135bp previously when the loan was originally
signed in November 2016. HKBN had also
extended the maturity to May 2023 from
November 2021.
The margin is tied to a leverage grid:
325bp for a total net leverage of greaterthan 5.5x; 275bp for leverage of 5.01x–5.5x;
220bp for 4.51x–5.00x; 170bp for
4.01x–4.50x; 120bp for 3.51x–4.00x; 105bp
for 2.51x–3.50x and 95bp for 2.5x or below.
HKBN announced last week its proposal to
merge with WTT in a HK$10.5bn deal would
see it paying WTT’s private-equity owners
TPG Asia and MBK Partners LP around
HK$5.5bn in new HKBN shares and equity-
like vendor loan notes, while assuming the
target’s US$670m senior notes issued last
November.
The US$670m five-year non-call three
bond pays 5.5% per annum. Proceeds
refinanced a HK$4.851bn five-year senior
loan backing the TPG-MBK consortium’s
HK$9.5bn leveraged buyout of WTT from
Wharf Holdings in late 2016.
TPG and MBK had won the race to buy
WTT despite a higher offer from HKBN as
Wharf was keen to wrap up the sale before
the end of that year, while HKBN’s bid was
subject to approval from shareholders and
Hong Kong’s anti-trust regulator.
The merger between HKBN and WTT is
subject to approvals from shareholders and
the anti-trust regulator and is expected to be
completed in the first quarter of 2019.
Hong Kong-listed HKBN will soon holdan EGM to approve total issuance of its
new shares worth HK$3.5bn as well as the
issuance of HK$1.9bn non-voting, zero-
coupon vendor loan convertible notes to TPG
and MBK, equally.
The financing structure of the acquisition
means HKBN is not likely to raise any new
loans or refinance existing debts in the near
future, sources said.
The pricing reduction HKBN achieved
earlier in May through the A&E exercise
squeezed out some existing lenders, and the
likely increase in leverage as a result of the
merger means a refinancing of HKBN’s loan
is unlikely as it would have to pay up and also
incur more fees.
Both Moody’s and Fitch put WTT on
positive review as the merger will help
increase business scale and cut costs. WTT is
currently rated B1/BB− (Moody’s/Fitch), while
HKBN is not rated.
More than a third of Hong Kong’s total
households are HKBN’s customers, while
WTT commands a 16%–17% share of the
enterprise market. The merger will further
expand HKBN’s footprint in the enterprise
business segment after its acquisition of
another peer, New World Telecom, in 2016.
EVELYNN LIN, YAN JIANG