cash holdings at the central
bank.
“The higher CLF for 2018
could be modestly positive for
Triple A rated RMBS, which is
the most common collateral
for the CLF,” said strategist Gus
Medeiros in a Deutsche Bank
research article.
Nevertheless, overall
issuance is unlikely to return
to pre-crisis levels, when over
A$45bn equivalent were sold
annually in RMBS alone in the
years 2005-2007.
Approximately half was
issued in foreign currencies,
something which no longer
makes economic sense given
the inbuilt costs that bank
counterparties face when
hedging with securitisation
SPVs.
Furthermore, many pre-
crisis buyers are no longer
around, including structural
investment vehicles like
asset-backed commercial
paper conduits, leaving more
stable real money investors to
dominate demand.
ChemChina mulls tighter takeout
Loans Conglomerate to attract bridge lenders despite price compression and Syngenta
concernsBY CAROL ZHONGCHINA NATIONAL CHEMICAL CORP
(ChemChina) is looking for
big-ticket commitments on
a US$5.5bn refinancing of
Syngenta acquisition debt,
despite questions over its Swiss
unit’s mounting legal costs.
ChemChina sent out an
indicative term-sheet to
lenders, including existing
ones on its US$12.7bn bridge
loan, and is aiming to form
an arranger group. The self-
arranged facility is expected to
have maturities of three and
five years, and margins linked
to ChemChina’s credit rating.
The latest refinancing comes
shortly after Syngenta was
forced to postpone a US$7bn
bond issue amid concerns that
its exposure to class-action
lawsuits could threaten its
investment-grade credit rating.
ChemChina is rated Baa2/
BBB/A–, a notch or two above
Syngenta’s BBB–/BBB.
Lenders to the new
ChemChina facility stand
to earn indicative interest
margins in the 100s for an IG
rating and in the 200s for a
non-IG rating.
Some Chinese and
international banks are ready
to offer up their balance sheetsto the highly leveraged state-
owned conglomerate, despite
thinner returns and longer
tenors compared to the earlier
one-year bridge facility, which
pays an opening margin of
200bp over Libor and partially
backed the acquisition of
the Swiss-based seeds and
pesticides company.
“There aren’t many Triple
B credit deals in Asia now.
With ChemChina’s brand,
the refinancing won’t be a
problem,” said a Hong Kong-
based loan banker whose
employer committed to the
earlier facility.
In July, ChemChina received
an overwhelming response for
its US$3bn triple-tranche bonds,
shortly after it completed the
Syngenta takeover. Proceeds
were used to repay part of
the bridge loan, paring down
the outstanding amount to
US$8.94bn.
Some paper from the bridge
financing also earned a good
reception in the secondary
market, even though the trades
took place at or around par.
The US$12.7bn facility,
which closed in May,
complemented a US$20.2bn
non-recourse bridge loan raised
at the Syngenta level, which
was later reduced to aboutUS$7.01bn. In addition to the
two bridge loans, ChemChina
raised another US$20bn mainly
through perpetual bonds to
back the SFr43bn (US$44bn)
acquisition.
However, Syngenta could
face possible hiccups in its
refinancing over uncertainties
surrounding the company’s
genetically modified corn
lawsuit liabilities.
Fitch last week became
the second major agency to
put Syngenta on notice for a
potential downgrade, flagging
concerns about the company’s
ability to settle the lawsuits and
whether or not the Chinese
government will support the
litigation liabilities.
S&P earlier placed Syngenta’s
rating on credit watch with
negative implications. It
downgraded Syngenta to BBB–
in May, putting it a notch above
junk.
That said, ChemChina is
not in a rush to complete the
bridge takeout as the existing
loan, which also comes with
a six-month extension option,
only matures next May.
Syngenta also said it still
intended to come back to the
bond market in the coming
months after pulling its
planned US$7bn bond. For daily news stories
visit http://www.ifrasia.comnew financing are near the
levels offered on SoftBank’s
September 2013 financing,
which comprises a ¥1.1trn five-
year tranche and an ¥880bn
seven-year tranche. Those
tranches are paying interest
margins below 130bp and
150bp, respectively, based on a
ratings grid.
However, some bankers have
expressed concerns over the
seven-year tenor as it is hard to
evaluate the company’s long-
term risks.
“It is hard to say, given the
gigantic financing size, but I
don’t think the deal will be as
heavily oversubscribed as the
last one,” said a senior banker
at a Japanese bank.
The financing offers
various ticket levels in senior
syndication; less than ¥50bn,
¥50bn-¥99bn, ¥100bn-¥149bn,
¥150bn-¥199bn and ¥200bn
or more. Responses are due
on October 25 and general
syndication is expected to be
launched after the close of
senior syndication.
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