March 6, 2020 / 7:44 AM / 3 months ago

Lenders join Thai shopping spree

* Loans: Berli Jucker eyes record US$10bn loan for Tesco’s Asian business

By Chien Mi Wong and Prakash Chakravarti

HONG KONG/MUMBAI, March 6 (LPC) - Thailand’s loan market is back with a bang, with some of the county’s richest tycoons in talks for multi-billion dollar financings to support bids for the Asian operations of supermarket chain Tesco.

Charoen Sirivadhanabhakdi’s Berli Jucker is on the acquisition trail again, four years after its purchase of Big C hypermarkets. Fellow tycoons Dhanin Chearavanont through his flagship Charoen Pokphand Group and Tos Chirathivat via the Central Group are also in the hunt.

All three groups are seeking jumbo financings that would rank among Asia’s biggest syndicated loans and set a record in Thailand.

Berli Jucker already has the support of around a dozen banks for a 24-month US$10bn-$11bn bridge loan. ANZ, Bank of China, BNP Paribas, Kasikornbank, Maybank, Mizuho Bank, Natixis, OCBC Bank, Siam Commercial Bank, Standard Chartered Bank, Sumitomo Mitsui Banking Corp and United Overseas Bank have won the mandate for the borrowing.

The battle for the Asian operations of Britain’s biggest retailer is an enticing prospect for lenders in an otherwise slow year, with dealflow dented by slowing economic growth, the US-China trade dispute and, most recently, the uncertainty around the coronavirus outbreak.

“Everyone is focused on the Tesco deal as the Asian loan market has not seen a transaction of this size and profile in a while,” said a Singapore-based banker close to the situation.

Some lenders are likely to run multiple deal trees and could figure on the loans supporting CP and Central, ensuring a role for banks regardless of which bidder emerges victorious.

“This is an extremely competitive situation and the requirement is also quite big. The more the merrier,” said another senior loans banker in Singapore, who is involved in one of the loans.

Some banks are apprehensive about the amount of debt the bidders are looking to take on, even if Tesco’s operations in Asia are some of the most prized assets on offer. The three bidders are expected to pay a premium to win the race with the final price potentially reaching US$12bn-$13bn - more than 25 times earnings.

“It would be interesting to see whether these companies would be able to stomach this level of debt given that the leverage levels are so high,” said the first banker in Singapore.

In the six months to August 24, Tesco’s Thai and Malaysian businesses together generated sales of £2.56bn (US$3.3bn) and operating profit of £171m.

Tesco is set to make a decision on the sale this month. The British company’s Asian operations comprise some 2,000 supermarkets and convenience stores in Thailand, where it is one of the biggest retail players under the Tesco Lotus brand, and 74 stores in Malaysia.

MIXED FLAVOUR

The loans for the Thai bidders mark the first M&A financings from the country’s retail sector involving both foreign and local banks in four years.

In March 2016, Berli Jucker signed a US$6.2bn-equivalent financing with more than a dozen foreign and domestic banks for its purchase of a 58.56% stake in Thai hypermarket operator Big C Supercenter from France’s Casino Group.

Berli Jucker managed to trump Central Group, which owned a 25% stake in Big C and initially did not want to cash out. However, Central sold the stake to Berli Jucker through a tender offer and in turn acquired Casino’s Big C business in Vietnam.

At US$10bn–$11bn, the Tesco M&A loan would almost match the US$11.73bn total of all syndicated loans completed in Thailand in the past four years, and eclipse the annual record of US$8.61bn set in 2013, according to Refinitiv LPC data.

Thailand’s retail sector is no stranger to jumbo loans, or expensive acquisitions. In June 2013, seven Thai and foreign banks clubbed a US$6bn 12-month bridge loan for the acquisition of wholesaler Siam Makro by Dhanin’s flagship, convenience store operator CP All, valued at around 46 times 2013 earnings.

This year, volumes will earn a boost from a US$1.8bn-equivalent loan backing pan-Asian life insurer FWD Group Financial Services’ acquisition of the life insurance unit of Siam Commercial Bank.

StanChart is the original mandated lead arranger and bookrunner of the three-year facility, which was launched into limited syndication in November and has attracted a handful of banks in the senior phase.

Reporting by Chien Mi Wong and Prakash Chakravarti; Editing by Vincent Baby and Steve Garton

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