A recent measure to limit
outflows demonstrated some
of the additional risks investors
face, perhaps explaining why
the buyside has yet to develop
further.
This year, some fund
managers won government
approval to extend by 10 years
the maturity of funds with
about US$1bn of assets under
management that were to be
wound up or made open-ended
funds by 2023, which would
have allowed investors to
withdraw their money.
“Extending the mutual funds’
term without the consent of
the investors sends a negative
signal, damages confidence,
and impedes the development
of the institutional investor
base, a much-desired objective,”
wrote the World Bank in a
report this month.
Economic factors are
expected to be supportive
for equities, with incomes
in Bangladesh still low but
growing fast. Official statistics
put the country’s GDP growth
at 7.9% in the 2018 fiscal year,
and it could benefit from
tension between the US and
China.
“Bangladesh and Vietnam
should be big beneficiaries
of the trade war between the
US and China,” said Hugger.
“If you are a US company and
purchasing Chinese textile
commodities and simple
apparel, and you are slapped
with a tariff, it makes sense
to buy some products from
Vietnam and Bangladesh
instead.”
However, upward
momentum in the local
stock market is expected to
be weighed back by political
concerns in the near term.
“Until the [general] election
next year we expect the stock
market to be moving sideways
or slightly softer,” said Hugger.
“The two political parties are
fighting very hard, and there
could be violent strikes (hartals)
in which the whole country is
paralysed. The stock market
gets very volatile and nervous
two or three months before an
election.”
Calsonic gears up for Magneti LBO
Loans KKR-owned auto parts maker drives in with largest Asian LBO financingBY WAKAKO SATOJapanese auto parts maker
CALSONIC KANSEI is raising about
€5bn (US$5.76bn) to support its
€6.2bn acquisition of the high-
tech car parts unit of Italy’s Fiat
Chrysler Automobiles, in what
will be Asia’s largest leveraged
buyout loan.
Mizuho Bank, MUFG,
Sumitomo Mitsui Banking Corp
and Sumitomo Mitsui Trust
Bank have underwritten the
€5bn-equivalent seven-year
senior financing backing the
buyout of MAGNETI MARELLI,
which specialises in lighting,
powertrain and high-tech
electronics.
Calsonic Kansei is following
a different syndication strategy
compared with its previous
loan that was agreed 18 months
ago. That ¥430bn (US$3.9bn
then) seven-year facility, which
backed its leveraged buyout by
US private equity giant KKR,was a rare Japanese covenant-
lite deal.
Five banks clubbed the
financing despite the large size
and a somewhat high leverage
of 5.7x. That loan will remain
untouched and will not be
refinanced as Calsonic raises
the new loan for Magneti’sbuyout. The total outstanding
debt for both companies will
be around ¥1trn, representing
leverage of less than six times.
“The leverage multiple is
quite modest because of the
auto parts sector,” one source
said, pointing to the robust
combined earnings of the two
entities and the synergies the
acquisition will bring.INTERNATIONAL SCOPE
Shares of Calsonic and Magneti
will form the collateral for
the new loan, three-quarters
of which will be denominated
in yen and the remainder in
euros.
That should help widen
the universe of lenders, with
existing European lenders to
Magneti keen to renew their
relationships with the target
and forge a new one with
Calsonic. International banks in
Asia have already been sounded
out on the new loan.
However, tight pricing and
abundant liquidity among the
four Japanese leads could lead
to limited syndication. The
pricing of the new financing
is likely to be similar to the
previous ¥430bn LBO loan,
which paid around 200bp over
Libor.
“I am hearing it is a Japanese
pricing which is probably too
tight for European banks,” one
of the sources said.
Nonetheless, the Magneti
loan will give a significant fillip
to LBO volumes in Japan, which
have stalled to a mere US$264m
from two deals this year after
enjoying a bumper crop last
year with a tally of US$6.92bn
from 12 LBO loans. Activity in
2017 was robust with Calsonic’s
¥430bn LBO loan topping the
charts – it was the largest LBO
from Japan.
The Magneti financing
creates a record for the largest
LBO loan from Asia, eclipsing
a A$5.9bn (US$4.5bn) club
loan closed in June last year
to fund a Macquarie Group-led consortium’s A$7.62bn
acquisition of New South Wales
power grid Endeavour Energy.INTO THE TOP TEN
The acquisition will create
the world’s seventh-largestindependent automotive
components supplier with
€15.2bn in revenue, Calsonic
said.
Calsonic relies on Japanese
carmaker, and former
shareholder, Nissan Motor for
most of its sales, and KKR has
said it will help it to expand
globally.
Fiat Chrysler said it would
enter into a multi-year
agreement to secure supplies to
its plants and also to maintain
operations and staff in Italy.
Calsonic is paying 17x
Magneti’s estimated earnings
for 2019, according to a Reuters
report on October 22. CK
Holdings, the borrower and
Calsonic’s holding company,
will change its name to Magneti
Marelli CK Holdings once the
acquisition is completed.
Calsonic’s buyout of
Magneti is expected to be
completed in the first half
of 2019 and is subject to
regulatory approvals. For daily news stories
visit http://www.ifrasia.comTight pricing and
abundant liquidity
among the four
Japanese leads
could lead to limited
syndication. “I am
hearing it is a Japanese
pricing which is
probably too tight for
European banks,” one
of the sources said.The Magneti financing
creates a record for
the largest LBO loan
from Asia, eclipsing a
A$5.9bn (US$4.5bn)
club loan closed in
June last year to fund a
Macquarie Group-led
consortium’s A$7.62bn
acquisition of New
South Wales power
grid Endeavour Energy.