The last time Asian syndicated loans were this big, Bill Clinton was U.S. President and the iPod hadn’t been invented.
The average deal size in the Asia-Pacific region outside Japan was $372 million in the first five months of this year, data compiled by Bloomberg show. That’s the highest for the period since 2000, as the top four borrowers, including Macau casino operator Sands China Ltd. (1928) and Malaysian oil and gas group SapuraKencana Petroleum Bhd., signed more than $20 billion of loans between them.
Maturing Asian companies are taking advantage of the narrowest bank-loan interest margins in four years to grow by acquisition and refinance large slices of existing debt. Merger and acquisition activity in the Asia-Pacific region jumped 60 percent to $325.6 billion this year, Bloomberg-compiled data show, helping syndicated lending volumes swell to $161 billion, the most for a first five-month period since 2011.
“In Asian loans, a billion dollars has become the new hundred million,” Ashish Sharma, the head of Asia-Pacific syndication at Credit Suisse Group AG in Hong Kong, said in a May 30 interview. “Companies considered mid-cap a few years back have become much larger enterprises, and commensurately, their funding requirements for capex and acquisitions have increased significantly.”
While just $54 billion of syndicated loans were completed in the region during 2000, the largest was a $12 billion facility for Doncaster Group Ltd. to help finance the acquisition of Hong Kong Telecom.
Some $14.2 billion of loans are now being marketed in syndication in the region, with $7.8 billion in the pipeline, preliminary data compiled by Bloomberg show. The consortium taking Chinese online game developer Giant Interactive Group Inc. private, led by the company’s chairman and an affiliate of Baring Private Equity Asia Ltd., has attracted five lenders to its $850 million facility with about five others seeking approvals, people familiar with the matter said.
Malaysia’s MISC Bhd., the world’s second-largest shipper of liquefied natural gas, plans to boost the size of its seven-year loan to $1.5 billion from $700 million as 12 banks seek to join the club facility, a separate person said last week.
“We remain quite optimistic in terms of Asia’s loan volumes in the second half,” Atul Sodhi, chairman of the Asia Pacific Loan Market Association, said in an interview before its annual conference in Macau today. “We’ll continue to see cross-border acquisitions from Asian corporates, especially from China,” said Sodhi, who’s also head of global loan syndications at Credit Agricole Corporate & Investment Bank SA in Hong Kong.
The biggest loan in the region this year backed the development of Australian billionaire Gina Rinehart’s Roy Hill iron ore mine. The $7.2 billion debt package, a record for Australian mining, was signed in March and comprised loans and guarantees from five export credit agencies and 19 banks, according to a March 20 statement from Roy Hill Holdings Pty.
Sands China, a unit of Sheldon Adelson’s Las Vegas Sands Corp., signed a two-tranche $4.39 billion facility in March that refinanced existing debt, while SapuraKencana agreed on a four-tranche $4.99 billion deal that same month to help refinance funds used for its two most recent acquisitions.
While M&A activity in Malaysia and Thailand fell in the first five months of 2014 compared with a year earlier, Chinese deals were up 74 percent to $117.5 billion. Australian activity during the period climbed 150 percent to $62.5 billion and Hong Kong deals more than tripled to $23.6 billion.
“We expect an uptick in M&A financing this year,” Sharma said. “Funding isn’t a constraint for the right client and deal. They can fund their deals from loans, bonds and the U.S. term loan B market for acquisitions. A bridge loan can be taken out quickly by a loan, bond or equity issuance.”
Thai retailer CP All Pcl signed an 81.9 billion baht ($2.5 billion) facility in March to help repay a bridge loan for its acquisition of Siam Makro Pcl last year, the country’s biggest ever takeover. Power Assets Holdings Ltd., controlled by Asia’s richest man Li Ka-Shing, borrowed HK$37 billion ($4.8 billion) in January to back the spinoff of its Hongkong Electric Co.
Average borrowing costs for loans in Hong Kong fell 75 basis points to 166 basis points in the five months from a year earlier, according to Bloomberg-compiled data. Across the region, they fell 64 basis points to 182, the least for that period since 2010.
That’s led to jumbo refinancings. Noble Group Ltd., Asia’s biggest commodity trader by sales, signed a $2 billion facility in May that helped refinance a revolving one-year loan for 25 basis points less. Sun Hung Kai Properties Ltd., Hong Kong’s second-biggest developer, inked a HK$14 billion deal in January that refinanced debt at 23 basis points lower.
“Hong Kong pricing, especially for blue-chip names, has come down quite a lot since the last quarter of 2013,” Boey Yin Chong, a managing director and head of syndicated finance in Singapore at DBS Group Holdings Ltd., said in a May 30 interview. “But I don’t think it will go down further and will pick up in the second half.”