In a year when blue-chip clients were turning their backs on the loan market in favour of low-cost bonds, one bank ensured that syndicated loans remained relevant in Hong Kong. For finding new borrowers and leading a rare leveraged buyout, Standard Chartered is IFR Asia’s Hong Kong Loan House of the Year.
With many of Hong Kong’s traditional loan customers turning to the bond market, the city’s biggest lenders needed to look further afield. Standard Chartered did just that, closing a number of landmark deals and bringing new borrowers to the international market.
The bank not only maintained its relationships with the usual major borrowers, the Hong Kong blue-chips, but it also established new ties across a wide spectrum of industries from state-owned enterprises, multinational corporations, financial institutions and mid-cap entities.
StanChart successfully introduced first-time borrowers to the Hong Kong loan market, creating new business opportunities for local and foreign lenders.
In July, StanChart was a physical bookrunner, along with three other banks, on a US$235m debut offshore loan for state-owned Chinese automaker Beijing Automotive Industry Holdings. Commitments were scaled back after the deal was heavily oversubscribed. The facility was already more than 20% oversubscribed at the underwriting stage.
Despite the overall concern over lending to the Chinese real estate sector, and with limited liquidity in the offshore market, StanChart came up with innovative structures for these credits.
In June, it arranged a Rmb1.2bn onshore facility and a HK$850m offshore facility for Shui On Land that introduced new lenders to the Hong Kong-listed company. The deal came with tight covenants and a comprehensive security package, including mortgages over land-use rights and a building under construction for the onshore tranche, and an inter-creditor agreement between onshore and offshore lenders. The response was solid, with the offshore tranche about 37% oversubscribed.
StanChart did a second deal for the same borrower in the same year, and continued to achieve the same success even with the added challenge of finding more liquidity for the same name.
The stand-out deal of the year in the Hong Kong loan market, however, was the HK$2.95bn five-year LBO financing for CVC Asia Pacific’s acquisition of the Hong Kong broadband network and other IDD-related assets from City Telecom.
The deal marked the first LBO in Hong Kong since 2005, and was completed in June amid volatile market conditions.
StanChart was not afraid to put its money on the line, underwriting and prefunding the deal together with JP Morgan.
The syndication was a stunning success, with an extremely rare 100% hit rate after all 11 invited banks joined the deal in senior syndication – despite a month delay after IFR’s sister magazine Basis Point published the terms of the loan.
Among the lenders joining were French banks BNP Paribas and Credit Agricole, which was impressive as the former had downsized its leveraged finance team in Australia in November 2011 posing a question mark on its commitment to Asian leveraged finance.
The response demonstrated the sound structure on the LBO, which was also unique in Asia as the first for a “pure-play” broadband services provider, since the main underlying asset was Hong Kong Broadband Network’s self-built optical fibre network.
“In a highly volatile market environment, this transaction proves that, for the right sponsor, the right credit story, the right structure and, most importantly, the right financing partners, Asia is poised for more LBO deals,” said Bryan Liew, head of leveraged finance syndicate for Asia at Standard Chartered.
StanChart also continued to serve as one of the pioneers of the offshore renminbi loan market. StanChart and two other banks led a Rmb1.145bn offshore loan in Hong Kong for UniTrust Finance & Leasing.
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