IFR International - 21.07.2018

LOANS ASIA-PACIFIC

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Lenders are Bank of China Macau ûBank of
China London Industrial & Commercial Bank of
China Macau ûIndustrial & Commercial Bank of
China (Asia) ûAgricultural Bank of China KGI
Bank ûCTBC Bank ûCTBC Bank Philippines ûMega
International Commercial Bank ûShanghai Pudong
Development Bank ûOCBC Wing Hang ûBank of
Taiwan ûHua Nan Commercial Bank ûYuanta
Commercial Bank ûBank of Shanghai (Hong Kong)
Land Bank of Taiwan,Taishin International Bank
and Taiwan Business Bank
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CPID SIGNS US$500m LOAN

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,IBOR

Loan rush for China non-banks

„ CHINA CNCB Investment is latest offshore subsidiary to visit syndicated market

China Citic Bank’s overseas investment banking

unit is poised to make its debut in the offshore

loan markets with a US$500m facility, the

latest of several financings for non-banking

subsidiaries of Chinese banks.

CNCB (HONG KONG) INVESTMENT, which aspires to

be a boutique investment bank, is in the market

with a three-year bullet loan via mandated lead

arrangers and bookrunners China Construction

Bank (Asia), HSBC, Industrial and Commercial

Bank of China (Asia) and Mizuho Bank. The

deal offers top-level all-in pricing of 180bp over

Libor via an interest margin of 165bp and a

participation fee of 45bp.

It is the latest offshore loan to offer indirect

exposure to Chinese banks, which are not

frequent borrowers in the syndicated loan

market.

Including CNCB, overseas Chinese investment

banking units have tapped the offshore

syndicated loan market for more than US$2.1bn

so far this year, more than US$1.1bn of which

comes from first-time borrowers.

“The investment banking arms of Chinese

banks are benefiting from the rise of Chinese

companies on the international stage and the

companies’ growing need to tap the overseas

capital market,” a senior banker in Hong Kong

said.

“We have strong appetite in lending as the

parents are high-grade credits and the returns

are not bad.”

There are positive recent precedents for

CNCB’s loan. CCB International, a unit of China

Construction Bank, successfully doubled a three-

year bullet loan to US$1bn from a US$500m

target in July.

BOCOM International Holdings, a unit of Bank of

Communications, also increased a loan to HK$5bn-

equivalent (US$637m) from HK$4bn in May.

“The overwhelming reception for CCB

International and BOCOM International bodes

well for CNCB’s loan. The deal offers higher

pricing as CNCB is a smaller peer, and it will have

a good following as well,” said the loan banker.

BOCOM International Holdings’ three-year

financing offered lower top-level all-in pricing

of 155bp via an interest margin of 130bp and a

participation fee of 75bp. It pulled in 20 banks in

general syndication.

CCB International’s three-year bullet loan

offered similar top-level all-in pricing of 158bp

via an interest margin of 130bp and an upfront

fee of 84bp, attracting 15 banks in syndication.

BOOMING SECTOR

China’s banks have followed their clients

overseas in recent years and expanded into new

services, from securities to leasing and asset

management, in an effort to diversify revenue

streams and boost non-interest income.

In turn, the growth of those overseas

businesses has provided welcome diversification

for lenders.

Leasing firms, in particular, have been

active borrowers and proved popular with

globallenders due to their good track records

and strong parent companies.

A dozen leasing companies have raised loans

totalling US$2.23bn in the first half of this year,

and US$4.5bn in 22 deals last year, according to

Thomson Reuters LPC data.

“We see a number of non-bank financial

institutions looking to take advantage of ample

liquidity and cheap funding. The deals for

investment banking arms of Chinese banks provide

us the opportunity to diversify our portfolios,” said

another Hong-Kong based senior loan banker.

“Compared with private-owned enterprises,

they are much safer as we are turning towards a

more conservative strategy.”

A few high-profile defaults in recent years

soured sentiment among lenders for Chinese

POEs. In April last year, the country’s largest

integrated diary China Huishan Dairy Holdings

and the world’s largest aluminium producer

China Hongqiao Group both came under the

spotlight for the wrong reasons: missed debt

payments and covenant breaches, respectively.

For lenders, the booming sector raises

questions about the risk of the investment

banking units’ underlying portfolios, over-

expansion and single-borrower limits.

“Despite parentage of these investment

banking units, they are mainly involved in high-

yield financial activities. We will carefully review

their asset base and profile before lending,” a

third Hong Kong-based loan banker said.

“In addition, we are trying not to get overly

concentrated in particular single borrowers or

single industries as we already have exposure

to the other units of these Chinese banks

both onshore and offshore,” the third banker

said, pointing to two deals for units of Bank of

Communications this year.

Bank of Communications Macau raised an

increased US$350m loan via mandated lead

arranger HSBC in May and in February Bank of

Communications Financial Leasing raised an

increased US$430m three-year onshore loan.

Evelynn Lin