Last year was a big one for Taiwanese banks in the loan market. Their brimming liquidity, combined with an eagerness to lend no matter the price, made them some of the most sought-after sources of funds during syndication.
Their capacity to take up whole lower levels during syndication brought their aggressive stance to the limelight — even leading to some deals being solely led by Taiwanese banks using a purely Taiwan-targeted syndication approach.
But talk of tapering from May 2013, followed by an influx of Chinese issuers seeking dollar funding from Taiwan, caused borrowing costs to rise. And there is no sign of relief yet. One year ago, three month TaiFX was at 55bp; today it is at 160bp, and the widening is not predicted to stop anytime soon.
This is not great news for the loan market, as the appetite of Taiwanese banks to lend is abating. Borrowers need to wean themselves off Taiwan-targeted syndications if they want their deals to be successful, while lenders have to start shopping around other markets if they want to sell down enough to reduce their risk exposure.
This is no easy task. Finding a market to match Taiwan’s robustness will be hard, but liquidity remains in the market if you know where to find it.
One potential source of funds is Japan. With lenders there still liquid, selling down in the country bodes well for a deal and also offers a chance to get new names on board.
Japan boasts 100-plus regional banks, not to mention the trust banks and leasing companies that participate in deals on an ad-hoc basis. Getting them to join loans more regularly will of course be a challenge, but one that can be overcome pretty rapidly if there are enough banks doing their best to stem any credit concerns that may arise.
It is also time for a greater focus on Singapore. The fact that the city-state is a much more mature capital market than some of its other Asian counterparts means that its banks are keener to build up their loan books, and even lend to names lower down the credit curve.
Finally, while it may take some more time to become a reliable destination, the Philippines is also a possible place for syndication. Even if in the short term the country will offer limited opportunities, its huge dollar remittances can potentially play a role.
The message is already getting through, with Indonesia’s Adira Dinamika Multi Finance opting for a more broad syndication for its new $200m facility, launched at the end of February. It comes just three months after the borrower was last in the market with a largely Taiwan-focused deal, where four of the 10 banks that joined in general were Taiwanese – not an outcome that it could achieve now.
Taiwan banks will be back in the loan market once TaiFX settles down, but for now it’s time borrowers and lenders to shop around.