Loan market and its mysteries
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Loan market and its mysteries

Fund.

The loan market is often shrouded in mystery, given its rather private nature. But how much of an enigma is acceptable?

Asia’s syndicated loan market increasingly appears to find more hoops for bankers to jump through.

Now when a bank wants to market a deal, it typically sends out an invitation letter to potential lenders. This letter contains the basic information, like the company’s name, loan size, tenor and pricing. It also contains a short introduction about the borrower, the purpose of the deal, and the timeline.

If banks are interested, they sign a non-disclosure agreement to receive the term sheet, where the full structure of the transaction, including covenants and collateral packages, will be disclosed.

But this process seems to be getting ever more onerous for those in Hong Kong.

Some of my friends still burning the midnight oil (albeit at home) have told me of recent invitation letters containing only the company name and deal size. Sometimes, even the borrower’s name is not revealed, instead being replaced by a brief description of the sector the company is in and where it is listed, if it is a public firm.

Now, many have got used to this cloak-and-dagger situation that is increasingly an integral part of the loan market. They shrug it off, sign the NDA and wait for more information.

But the secrecy has now reached a new level. One bank recently sent out an invitation letter revealing only the deal size and the industry of the potential borrower. So far, so normal (if you can call this normal). The chaps I spoke to signed the NDA, expecting full details in return.

But what came next threw them off guard. The lead bank only sent back the borrower’s name, the tenor and pricing details. There was no word of the company’s business or deal timeline.

Instead, there was a request to sign a second NDA to gain further information, leaving my friends scratching their heads about the purpose of the two-step NDA process.

My advice to them? As always, when facing any mind-numbing task, turn it into a drinking game — but get the loans bankers to buy the rounds. After all, everything seems better after a few drinks, even NDAs.

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