There’s a twist to a new $330m deal from Astra Sedaya Financing (ASF) that has launched into syndication via 11 bookrunners. The Indonesian consumer financing, car and motorcycle leasing company has allotted specific target markets to each of the leads rather than opt for the normal free-for-all.
Bank of Tokyo Mitsubishi-UFJ, Mizuho Bank and Sumitomo Mitsui Banking Corp are focusing on Japan, and Korea Development Bank on South Korea. Citi, CTBC Financial Holding and Royal Bank of Scotland are targeting Taiwan, while CIMB, DBS, Maybank and United Overseas Bank are focusing on other Asian markets.
While not without precedent, ASF’s approach is still fairly novel in the Asian loans world. Sister company Federal International Finance (FIF) made waves at the end of last year when it used the same method to syndicate its $550m loan. And bankers unused to this strategy had plenty of concerns at the time.
Not only was there fear that competition among the leads would be counter-productive to the deal’s success, but bankers were also worried about ending up holding too much on their books if they didn’t manage to sell down enough.
Ultimately their fears proved to be unfounded. And this time around, bankers are singing praises about the structure, which comes with some enhancements. One key difference between the deals for FIF and ASF is that the latter is not being underwritten by the leads. Each of the 11 has committed a firm $30m, and they are looking to simply raise more in syndication to trigger the greenshoe option. They are hoping to hit a $500m target.
Not taking on underwriting risk certainly eases the challenge of syndication. Add to that the divvying up of distribution responsibilities and the transaction bodes well for the borrower and for the wider loan market.
For starters, having to focus on a particular market means the leads will have to consider a broader range of lenders. One stand-out feature of FIF’s outcome was the participation of Japanese leasing companies — names not typically seen in syndication.
With three banks concentrating on Japan to raise demand for ASF, it is highly likely the diversity of lenders will increase.
And diversity in names could make or break this deal. ASF’s transaction comes at a time when Taiwanese banks’ involvement in loans is faltering, stemming from a rise in funding costs, lack of profits on thinly-priced deals, and excess exposure already to various credits. Their presence in new transactions is expected to be subdued, meaning that hunting out fresh names could become a critical factor in the success of deals across the board.
Moreover, in a market dominated by clubs and plain-vanilla deals, and at a time when loan volumes are sliding and the pipeline looks thin, it is essential that banks — and borrowers — start thinking creatively.
Tried and tested approaches are obviously comforting and effective for borrowers and bookrunners, and whether more issuers will follow in the footsteps of FIF and ASF is difficult to say. But when faced with competition from other capital market options, and a visible lack of supply, a different take on loan strategies can do wonders for issuers. It could even revitalise the syndicated loan market.