GlobalCapital Asia capital markets awards 2019: Loans

GlobalCapital Asia spent the last two months talking to banks and their clients to determine the most impressive capital markets transactions and advisers across Asia ex-Japan in 2019. We are pleased to begin our awards announcements in the loan market.

  • By GlobalCapital
  • 16 Dec 2019
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BEST INVESTMENT GRADE SYNDICATED LOAN

Marina Bay Sands S$4bn ($2.9bn) dual-tranche deal

S$3.75bn seven year term loan and S$250m seven year revolver

Mandated lead arrangers and bookrunners: Bank of America, Bank of China, BNP Paribas, DBS, Deutsche Bank, Maybank, Mizuho, MUFG Bank, OCBC, Standard Chartered, Sumitomo Mitsui Banking Corp and United Oversea Bank

Mandated lead arrangers: Industrial and Commercial Bank of China and Scotiabank

Arrangers: Bangkok Bank, Bank of East Asia, CIMB Bank, Crédit Industriel et Commercial, CTBC Bank, Hong Leong Group Singapore, RHB Bank and Shanghai Pudong Development Bank

Participants: Bank of Communications, Bank of Taiwan, Barclays, Chang Hwa Commercial Bank, E. Sun Commercial Bank, Hua Nan Commercial Bank, KEB Hana Bank, Korea Development Bank, Land Bank of Taiwan, Mega International Commercial Bank and Shanghai Commercial and Savings Bank

When Marina Bay Sands (MBS) announced in April that it was spending S$4.5bn to add a fourth tower to its integrated resort in Singapore, it captured the market’s attention. The new building, which includes a 15,000-seat arena, a luxury hotel with 1,000 rooms and additional meeting, incentive, convention and exhibition space, will help the hotel operator expand its non-casino revenue sources.

To fund the construction, MBS took a two-pronged approach. It tapped the domestic loan market for a jumbo S$4bn new money deal, split between a S$3.75bn term loan portion and a S$250m revolving tranche. Simultaneously, the company executed an amendment and extension of a 2018 loan. It tweaked the covenants and extended the tenor of that S$5.1bn deal, which was split into a S$4.6bn six year term loan and a S$500m 5.5 year revolver, by two years and three years, respectively.

In total, the new money plus A&E transactions were worth S$8.6bn.

The size deserves kudos. It was the largest ever Singapore dollar denominated syndicated facility, and the most widely syndicated real estate-backed loan in the southeast Asian country. MBS also pushed the boundaries of the local currency market with a seven year tenor — the first time this maturity had been tested in Singapore dollars.

The transaction was not without its fair share of challenges, despite the borrower’s high profile and recognition in the bank loan market and the investment grade nature of its deal.

First was finding enough liquidity for the chunky size. The lead banks targeted just a limited group of lenders for the loan, which was syndicated only within Singapore to avoid issues around cross-border taxation.

The second challenge was around MBS’s flourishing casino business. Some banks have restrictions on lending to firms in the gambling industry.

To navigate these hurdles, the bookrunners had to structure the transaction in a way that appealed to banks. For starters, the new money portion was split into two tranches — the S$250m chunk was for the casino business and the S$3.75bn tranche for the non-casino business.

The bank group made the sensible decision to put together a corporate-style borrowing, rather than a project finance loan. As a result, lenders could benefit from the cash flows of the group’s current operations, a security package including both the completed resort and the new project, as well as robust security coverage.

Then there was the pricing. The margin was based on a leverage grid, with the opening price set at 165bp over Sibor. The pricing range was between 150bp and 185bp.

The deal received an overwhelming response during syndication, with the new money portion receiving commitments of more than S$7bn from 30 banks, leading to a 3.6 times oversubscription. The A&E received the go-ahead from all the lenders.

For a gaming-linked deal of this size to fly off the shelves showed the depth of the Asian loan market. The smooth execution and structuring showed the bookrunners’ ability to read market conditions. The oversubscription, despite Singapore dollars not being the natural currency of many of the banks in the syndicate, showed the appeal of a borrower like MBS.

For all these reasons, MBS’s deal is GlobalCapital Asia’s pick for the best investment grade syndicated loan of 2019.

BEST HIGH YIELD SYNDICATED LOAN

Vinmec International General Hospital’s $360m three year loan

Mandated lead arrangers and bookrunners: Cathay United Bank, Deutsche Bank, Maybank, Mega International Commercial Bank and Taipei Fubon Bank

Mandated lead arrangers: KEB Hana Bank and Taishin International Bank

Arrangers: Bank of Panhsin, Far Eastern International Bank, Shanghai Commercial and Savings Bank, Taiwan Business Bank, Taiwan Shin Kong Bank and Yuanta Commercial Bank

Vietnam turned out to be a bright spot for loan syndications bankers in 2019. The country’s growth remains solid, with GDP expected to rise by 6.8% this year, according to the Asian Development Bank.  Fitch revised Vietnam’s credit outlook to positive from stable in May. Before that, S&P Global Ratings upgraded Vietnam to BB from BB- in April, while Moody’s boosted it to Ba3 from B1 last year.

Optimism regarding the country was partly because of it benefiting from the US-China trade war as companies relocate manufacturing units from China to Vietnam to avoid tariffs and lower their labour costs.

Vinmec International General Hospital, a subsidiary of Vietnamese conglomerate Vingroup, grasped the opportunity to make its debut in the syndicated loan market.

The company is a not-for-profit firm that operates hospitals in Vietnam. The unique nature of its business meant some handholding was required to get banks comfortable with the transaction. That came in the form of a guarantee from parent Vingroup, a familiar name to banks.

In addition, Vinmec structured its three year loan with a bullet repayment structure. Although previous borrowings from both Vingroup and its car manufacturing subsidiary VinFast Trading and Production had longer tenors of five years, those deals were amortising.

With a shorter tenor, Vinmec managed to secure a margin of 300bp over Libor — the tightest level ever achieved by a Vingroup company, said bankers on the deal.

Despite this, the loan was well received by the market. Original mandated lead arranger and bookrunner Deutsche Bank brought in four banks during senior syndication and attracted another eight lenders during general syndication.

The loan stands out for a handful of reasons. It helped Vinmec build new banking relationships with a diverse group of firms from South Korea, Europe, Malaysia and Taiwan, allowing it to increase the loan size from $300m.

The debut borrower also achieved tight pricing, despite coming from a novel sector for banks.

But more importantly, it showed how far Vietnam’s borrowers have come in the international loan market, as they slice away on pricing year in and year out. For setting a new benchmark for Vingroup businesses, and for Vietnamese corporate borrowers, Vinmec’s loan deserves accolades.

BEST LEVERAGED/ACQUISITION FINANCE
BEST LOAN

Anta Sports Products’ €2.2bn dual-tranche loan for Amer Sports Corp’s acquisition

€1.3bn five year bullet loan and €900m five year term loan

Mandated lead arrangers and bookrunners: Bank of America, Bank of China, Citi, Credit Suisse, HSBC, JP Morgan and Standard Chartered

Mandated lead arrangers: China Minsheng Banking Corp, Commerzbank, Industrial Bank and Intesa Sanpaolo

Arrangers: China Citic Bank, Industrial and Commercial Bank of China and Ping An Bank

Participants: Bank of Communications, Bank SinoPac, Crédit Industriel et Commercial, KEB Hana Bank, MUFG Bank, Shanghai Pudong Development Bank and Shinhan Bank

At a time when mega Chinese outbound acquisitions are rare, Anta Sports Products made its mark with its purchase of Finland’s Amer Sports Corp. It started in December 2018, when Anta, a Xiamen-based sportswear maker, led a consortium of FountainVest Partners, Tencent Holdings and Chip Wilson, founder of Lululemon Athletica, to acquire Amer for €4.6bn.

The announcement came at a time when Chinese companies’ overseas purchases were coming under the glare of different regulatory bodies. Europe had set up a framework to scrutinise foreign investments for national security reasons, the US was blocking any acquisition it viewed as a threat, and the Chinese government itself was adopting stricter capital controls.

But Anta still managed to pull off the largest global sporting goods M&A transaction, the largest consumer and retail M&A transaction in Asia since 2014, and the largest public takeover ever in Finland. Its purchase of Amer created one of the largest sporting goods companies globally, rivalling Nike and Adidas.

Its financing package for the acquisition was also impressive, making it GlobalCapital Asia’s pick for the Best Acquisition and Leveraged Loan during the awards period, as well as the Best Loan of the year. 

Anta had initially planned to acquire Amer on its own. Bank of China and Citi provided the company with a letter of commitment for a bridge facility in January 2018. But because Anta had never raised such a large amount of debt in the offshore market before, it ended up changing tack and partnering with the consortium.

Then the question around the funding arose: should it be a corporate level loan, a target level loan or divided between the two? The leads decided to split the financing to make full use of the liquidity available in Asia for Anta and in Europe for Amer.

The deal was structured as a €2.2bn dual-tranche holding company-level recourse loan in Asia and a €2.015bn target level non-recourse financing raised in the European term loan B market.

This made the deal stand apart from other leveraged loans this year; the recourse/non-recourse combo has been rare since China National Chemical Corp used this structure to fund its high-profile acquisition of Swiss seeds maker Syngenta in 2016, said bankers.

The structure worked well, creating some tension between demand in Asia and Europe. The Asian syndication attracted a diverse group of Chinese and foreign lenders, while the euro demand was also strong. Despite being privately-owned and a debut name in the offshore market, syndication was wrapped up in two months, oversubscribed, with 21 banks forming the final lending group.

But the leads job wasn’t done after syndication. Anta ended up being targeted by short sellers twice.

In May, Blue Orca Capital questioned Anta’s accounting and corporate governance, and later in July, Muddy Waters published a report accusing Anta of allegedly inflating its profit margins. Anta showed its savvy by defending itself quickly and addressing the concerns directly with lenders. Its loan continued to trade at par in the secondary market, said bankers.

There was one other impressive deal during the awards period: a $360m five year loan to support Baring Private Equity Asia’s acquisition of India’s NIIT Technologies. The deal deserves recognition for its structure: it was put together as two different facilities due to uncertainty over whether Barings would get a majority or a minority stake in the Indian firm. Pricing would also move down from 450bp to 400bp if the private equity firm got a majority stake in NIIT. Despite the complexity, the deal managed to attract enough banks in senior syndication, with the leads eschewing a general phase altogether.

But Anta takes the gong for the Best Loan of the year. For its size, diversity of the syndicate group, structuring and cross-border nature of the financing, the Chinese company’s loan ticks all the right boxes.

BEST LOANS HOUSE

Standard Chartered

It was a difficult year for the Asian loan market. Trade tensions between the US and China soured sentiment at a time when global growth has come under pressure. India’s non-banking financial companies were — and remain — in the midst of a crisis due to defaults and a liquidity crunch, putting further stress on a country that has witnessed slowing growth in 2019. In southeast Asia, elections forced many companies to postpone their fundraising plans.

Those difficulties, alongside a roaring bond market, led to a significant drop in loan volumes this year. During GlobalCapital Asia’s awards period, a total of $388.9bn was raised from 990 deals in all currencies in Asia ex-Japan, shows Dealogic. This compares to a higher $409.9bn from 1,137 transactions during the same time last year.

Few international banks gained market share during our awards period, except for Standard Chartered, this year’s Best Loans House. The bank ranked second among bookrunners for Asia ex-Japan loan volumes, getting credit for $12.6bn versus $11.5bn during the same time last year. Its market share rose from 4.41% to 5.73%, shows Dealogic.

It wasn’t just a volume game for Standard Chartered. It ranked top among banks for Asia ex-Japan loans revenue during the awards period, netting $51.3m for a 7.95% market share, versus a 6.21% market share through $75.6m in revenues during the same time last year, according to Dealogic. Bankers at the firm say 2019 was their best year for loan fee revenues across Asia, the Middle East and Africa.

The success has come from across the Asia region. In China and Hong Kong, the bank continued to bring new borrowers to the offshore loan market, even though many companies were reluctant to raise money amid slower expansion plans.

Standard Chartered closed 19 transactions for debut borrowers from China and Hong Kong between January and September, an increase from 13 deals during all of 2018.

In the Indian market, an onshore liquidity tightening meant Standard Chartered’s rupee loan business was rather small, but the bank more than made up for it with its ability to find the right credits for dollar loans.

Jumbo acquisition-related financing deals also helped give a big boost to Standard Chartered’s loan franchise. Among the most high profile transactions, the bank was the original sole lead for FWD Group’s $1.8bn three year loan for Siam Commercial Bank’s insurance business acquisition. It pre-funded the tightly-priced deal, before distributing it to a few more lenders without a formal syndication. It was also one of the lead banks for Anta Sports’ €2.2bn loan to back the acquisition of Finland’s Amer Sports Corp — named the best leveraged and acquisition finance and the loan of the year by GlobalCapital Asia.

Accurate market read

Standard Chartered has long had a reputation for being a risk-taker, often willing to take big underwriting chances on high yield names. That caused it problems in 2016, for instance, when it reported a loss of close to $1bn from its India operations as loan impairments from its India portfolio soared.

But since then, it has been prudent with the use of its balance sheet, keeping a close eye on returns, and selling down in the secondary market to create capacity for new loans. This year, its average loan hold was 9.9% versus the market average of 14.6%, say bankers at Standard Chartered.

It was able to access diverse sources of liquidity from a range of countries in Asia and Europe. For instance, it successfully closed a $500m five year loan for African Export–Import Bank with a guarantee from the Export-Import Bank of China. The deal targeted Chinese banks and provided the African borrower with access to medium term financing not available to it in the EMEA market.

Another example was a $300m loan for Export-Import Bank of Malaysia. Standard Chartered managed to bring a Japanese lender, Shinsei Bank, to join the Islamic financing. It was the first time the lender was committing to an Islamic financing loan.

The prudent approach helped not just with distribution but also origination. That was key this year, when constant trade war-related headlines meant banks had to demonstrate their ability to read the market and adjust their strategy quickly to find new opportunities.

One of the themes for the Chinese market this year was acquisition-related financings in the real estate sector.

Global financial sponsors have been actively buying property assets in the country due to their appealing valuations. After receiving a few enquiries, Standard Chartered quickly realised the opportunity in the industry, and decided to make three of its bankers concentrate just on the real estate industry.

That refocus paid off. Standard Chartered helped Gaw Capital Partners, a private equity fund that focuses on the real estate market, put together a HK$2.8bn loan and also worked with Shui On Centre Company for a HK$1.2bn deal. It increased the number of property-backed loans it did during the awards period versus in 2018. 

That’s not to say Standard Chartered made no mistakes. The bank was one of the bookrunners for Shriram Transport Finance Corp’s $350m loan, a deal which failed to attract any lenders during syndication, even after the lead banks bumped up the pricing on offer.

But the bank learnt from the experience. It started applying a stricter client selection process, which made it turn down a number of tricky deals in the sector this year.

There were some other headaches too. A subsidiary of Indonesian textile company Duniatex missed an interest payment this year on a $260m syndicated loan, closed in 2016. While Standard Chartered was not involved in that transaction, the non-payment triggered a cross-default on a bilateral facility provided to the company by the bank.

Another case was with Singaporean hard disk company MMI International. It took a loan that was contingent on an eventual listing on the Shenzhen Stock Exchange, after private equity owner KKR divests its stake to a Chinese consortium. But when MMI was hit by the trade war, the listing was put on the backburner and the consortium turned away from the company. The loan got cancelled, but a small amount was not repaid on time, leading to a default.

Although banks in the syndicate group were burnt by the companies, bankers at Standard Chartered say they did their best to resolve these issues, given they also have exposure to the companies. Duniatex’s woes took both the loans and bonds market by surprise. In MMI’s case, it has hired Deloitte to advise on its financial woes.

These cases were troubling, but Standard Chartered has made sure to remain on top of the situations. Its loans franchise stands out in 2019.

  • By GlobalCapital
  • 16 Dec 2019

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Rank Arranger Share % by Volume
1 Bank of China (BOC) 18.45
2 Industrial and Commercial Bank of China (ICBC) 13.56
3 China Merchants Bank Co 12.10
4 China Construction Bank (CCB) 9.85
5 Agricultural Bank of China (ABC) 8.93

Bookrunners of Asia-Pac (ex-Japan) ECM

Rank Lead Manager Amount $bn No of issues Share %
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1 Morgan Stanley 22.44 89 7.39%
2 CITIC Securities 19.78 121 6.52%
3 China International Capital Corp Ltd 19.76 95 6.51%
4 Goldman Sachs 17.76 107 5.85%
5 China Securities Co Ltd 15.52 60 5.11%

Bookrunners of Asia Pacific (ex-Japan) G3 DCM

Rank Lead Manager Amount $bn No of issues Share %
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1 HSBC 28.85 223 7.62%
2 Citi 28.41 169 7.50%
3 JPMorgan 19.37 134 5.12%
4 BofA Securities 18.70 103 4.94%
5 Standard Chartered Bank 17.89 163 4.72%

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