Loan market a mainstay amid China, Greece uncertainty
GlobalCapital, is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2023
Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

Loan market a mainstay amid China, Greece uncertainty

Great Wall of China_2_230px

Loans bankers are keeping a close eye on the recent volatility in Chinese stocks and the cautious atmosphere in the Asian bond market. While most said it was too early to assess the impact of either event, they were hoping the skittishness of bond and equity investors might swing the pendulum in favour of syndicated loans, writes Shruti Chaturvedi.

Twists and turns in the global macroeconomic landscape could turn out to have mixed results for Asian loan syndications, reckon market participants. One event that has captured the attention of bankers is how Asian bond market investors are going to react to the issue of Greece’s looming bankruptcy and its uncertain future in the eurozone.

“There is a lot of concern among my ECM and DCM colleagues but the loan market remains characteristically resilient and reliable,” said one senior loan syndicator based in Hong Kong.

“If something very big happens or the Greek situation deteriorates significantly, we could see bond and equity players look for other avenues for fundraising. There, if you have a stable and solid loan market, there could be a shift to it.”

There are no clear indications of such a shift yet but property company loans from China are trickling back into the market. For example, China and Hong Kong high-end property developer HKR International launched a HK$4.8bn loan into general on Monday. The company is paying an all-in of 146bp for commitments of HK$350m or over.

Chinese property developer Country Garden is also in the market for a $400m refinancing. A banker familiar with that situation said select companies in the Chinese property sector could take the syndicated loan route versus bonds as there would be a cost saving for them.

Better known property names also want to extend relationships with banks both onshore and offshore, which could be another motivation for going to the international syndicated loan market, he said.

Ying Li International Real Estate, for instance, tapped both the onshore and offshore syndicated loans market at one go with a $135m deal that was signed on June 17.

The transaction consisted of a Rmb460m onshore tranche and a S$80m offshore tranche, both of which were 30-month term loans.

Separately, the huge swings in China’s onshore stocks are also making some bankers nervous.

“It’s not so much that the markets are down but the huge fluctuations that are giving me a headache,” said a second loans syndication banker. He said this was because those indices that had gained 150% have now receded about 30%, meaning markets were still up by 70%-80%.

“One company we lend to, I will not name, was down 12% yesterday and up 15% today. What do you make of that? All your credit assumptions appear shaky.”

However, several bankers indicated their eagerness to see more activity out of Greater China, volatility notwithstanding. Others said the effect of these movements was likely to be minimal.

“This will have some effect on brokers’ stocks but there will be support by the government so we are not that concerned about it,” said a leveraged finance banker.