HONG KONG, Sept 30 (LPC) - Syndicated lending in Asia
Pacific, excluding Japan, fell by 8.7% to US$334.38bn from 925
deals in the first nine months of 2016 compared to a year
earlier, dragging volume to a three-year low amid wider market
volatility, slow economic growth and limited M&A activity.
Third quarter lending of US$93.63bn was 24.66% lower than
US$124.28bn in the same period last year and only 225 deals were
completed, the lowest quarterly tally for six years since the
first quarter of 2010 when 182 deals closed.
Activity fell in every major Asian loan market except Hong
Kong and India as economic activity slowed, putting banks under
pressure to generate returns with fewer opportunities to lend.
"Loan volumes this year in Asia are lower for a number of
reasons. Among the biggest is the lack of event-driven
financings. Companies in Asia continue to preserve capital and
are not engaging in much expansion or mergers and acquisitions,"
said Wayne Green, BNP Paribas' head of loan syndicate & sales
The second half of 2016 has been less turbulent than last
year, when China's surprise devaluation of the renminbi
unleashed turmoil on global financial markets, the global
economy is facing uncertainty including the US Federal Reserve's
interest rate moves, the implementation of Japan's negative
interest rate policy and Britain's vote to leave the European
China's economic slowdown is the biggest single factor
depressing Asian lending. Chinese lending fell to US$21.52bn in
the third quarter, bringing China's total for the first nine
months to US$107.30bn, 11% lower than US$120.89bn a year
Despite the fall in volume, the PRC is still Asia's largest
loan market (excluding Japan), and accounts for 32% of regional
activity so far this year.
Australia, Singapore and Taiwan are also slowing with
year-to-date totals of US$40.65bn, US$23.55bn and US$24.70bn
respectively, showing drops of 28.9%, 18.2% and 34.5% compared
with the first three quarters in 2015.
Neighbouring Hong Kong bucked the trend due to continued
offshore borrowing for China Inc with a 27.6% increase to
US$80.44bn in the first nine months compared to the same time
last year, 63% of which was for Chinese borrowers.
India also achieved positive growth this year with a 14.70%
increase to US$16.10bn in the first three quarters, up from
US$14.02bn in the same period of 2015.
CHEMCHINA M&A BOOST
Hong Kong's tally was boosted by the US$12.7bn bridge loan
backing state-owned China National Chemical Corp's
SFr43bn (US$43.45bn) acquisition of Swiss seeds and pesticides
company Syngenta AG.
The acquisition is China's largest overseas purchase and the
recourse bridge for ChemChina is the largest loan from Asia
ChemChina's loan accounted for 25.23% of US$50.33bn in M&A
financing from Asia (ex-Japan) raised so far this year, which
has already exceeded 2015 M&A lending for the region of
ChemChina's deal also made up for the loss of a jumbo
financing of more than A$10bn (US$7.69bn) backing the
privatisation of electricity distributor AusGrid, which is
expected to proceed next year.
"The deal is now seen as a 2017 transaction and, as a
result, banks that had budgeted for potential income from the
deal will now have to look at alternative sources," Green said.
Australian event-driven financing has picked up in recent
weeks, with term loan B deals for infrastructure services
provider Ventia and US data management firm Iron Mountain Inc
and an A$4bn loan supporting Port of Melbourne's
privatisation has already attracted 17 lenders, showing banks'
hunger for quality assets.
Fourth quarter volume will receive a boost with the closing
of big ticket deals including a US$7.2bn bridge loan backing
Malaysian oil and gas giant Petroliam Nasional's
construction of its Refinery and Petrochemical Integrated
Development project and a US$3.5bn non-recourse loan to finance
Chinese internet company Tencent Holdings' acquisition
of a majority stake in Finnish mobile game developer Supercell.
Fewer loans this year have also led to oversubscriptions on
sovereign deals from frontier markets including Vietnam and Sri
In September the Government of Sri Lanka closed its largest
syndicated loan, which was increased to US$700m, and Vingroup
Joint Stock Co, Vietnam's largest private-sector real
estate developer, increased a five-year loan to US$300m.
"The ease with which big-ticket deals have closed this year
is remarkable," said Ashish Sharma, managing director and head
of loan syndication Asia Pacific at Credit Suisse.
"In the past three months, activity levels, particularly in
event-driven financings, have picked up with new structures and
geographies adding to the mix. Traditionally less active markets
such as Vietnam and Sri Lanka have brought transactions to the
market, giving lenders access to more diversified transactions."
Limited dealflow and strong bank liquidity is helping
top-tier borrowers to achieve tighter pricing across the region
as the loan market continues to face stiff competition from
competitively-priced bond markets.
Malaysian oil and gas company Petronas is seeking all-in
pricing of 80bp on a US$7.2bn 18-month loan, while Indian
state-owned oil and gas companies such as ONGC Videsh,
Bharat Petroleum Corp, Indian Oil and Oil
India have achieved all-in pricing of between 61bp to
84bp on short-term bridge loans.
"Bond markets continue to pose strong competition to loan
market activity as they remain open and have grown in volumes
this year. As such, there has been volume leakage from loan
markets to bonds," said Sharma.
(Reporting By Prakash Chakravarti; editing by Tessa Walsh)