Standard Bank’s $1.5bn syndicated loan, which refinances an existing deal, is expected to be closed at the end of August.
A banker near the deal said lead banks were awaiting approval from other Chinese lenders, which were dominating the syndicate.
“So far, so good... Markets have stabilised slightly, so banks can be a bit more flexible now,” said a banker near the deal.
Pricing on the deal is not expected to reach pre-crisis levels, though Standard had managed to obtain “very good pricing”, according to one banker.
Standard Bank raised a $1bn three year term loan last October. Bankers at the time told GlobalCapital it had managed to shave pricing down, thanks to its reputation as a top tier South African credit.
Prospects for other deals are dim, not least because of a wave of coronavirus-induced rating downgrades across the region.
The volume of emerging market syndicated loans has declined sharply as a result of the pandemic. So far this year, only 157 deals have been signed in CEEMEA. That is down by 41% from the 268 signed last year by this time.
“We do not have the country limits or appetite for many borrowers in MEA right now,” said a banker at a Chinese lender. “Market conditions have improved but it is not a good time for all borrowers to raise funds. I don’t expect more South African issuance any time soon, because of the rating downgrade.”
In March, Moody’s removed South Africa’s final investment grade rating, pushing it firmly into junk territory.
One banker had heard of activity in north Africa, with a sovereign discussing a potential syndicated loan to supplement financing from the official sector, but that bank could not “justify” participating in such speculative grade sovereign funding.
However, the drop in activity is also a result of borrowers retreating from the market to avoid locking in wider pricing on debt.
The cost of funding for most banks jumped in the aftermath of the coronavirus outbreak, and lenders passed that increased cost on to clients as higher margins on new loans. Those desperate for emergency financing had no choice but to accept wider margins. But many took a step back.
“Without a doubt, there has been less demand,” said a London-based loans banker. “We are still having regular conversations with clients about when is the best time to return to the market and what solutions are available to them. But many are choosing to wait it out. Those borrowers in non-critical situations are fine to bide their time until pricing returns to normality.”