In a challenging environment and amid stiff competition from the bond market, one bank stood out with its smarter approach. For its track record of sole mandates and a diverse list of innovative deals, Standard Chartered is IFR Asia’s Loan House of the Year.
Loan house, China loan house
Standard Chartered was in the spotlight for many reasons in 2014, and not all pleasant, but its focus on serving Asian borrowers continued to impress. While rivals formed top-heavy arranger groups amid stiff competition and surging bond volumes, StanChart generated money-making deals and backed clients without overextending its balance sheet.
StanChart has long been one of the biggest players in Asia’s syndicated loan market, but the emerging-markets lender has revamped its approach, focusing more on arranger fees than on interest income. Banking on its ability to sell down underwritten positions, StanChart won many sole mandates and developed innovative structures, with a diverse deals from across the region.
Distributing risk was no mean feat in 2014, as distressed situations in China, regulatory pressure and higher funding costs in Taiwan dampened lenders’ appetite in North Asia, while South and South-East Asia faced political and economic uncertainty for the first six months of IFR’s review period. Falling loan volumes, on competition from the bond market, also added to the challenge.
“The year has been much more difficult to make money,” said Cristian Jonsson, global head of loan syndications at StanChart. “Syndication has become more important for the bank as the focus on originating to distribute has increased. As a loans business, we get paid to underwrite and distribute.”
The bank’s performance in China was spectacular, particularly as it came up with innovative structures to help lesser credits raise funds. The best example was Hebei Iron and Steel Group, to which StanChart extended a US$150m three-year loan with a demand guarantee from Sinosure, and used it as collateral for a Dim Sum bond.
The quasi-securitisation structure led the bank recycle its capital in transferring the risk to the capital markets, while the credit enhancement from a state-run insurer allowed cheaper funding for an embattled borrower.
StanChart replicated the structure for other borrowers, such as Zhongce Rubber Group, China’s largest tyre manufacturer, which raised US$300m in August through its Hai Chao Trading arm with a guarantee from Export-Import Bank of China. Gluon Xima International, a unit of property developer Greenland, used a similar structure on a US$100m three-year loan. In both cases, StanChart repackaged the loans into secured floating-rate notes sold to bond investors.
StanChart also sold credit-enhanced loans for Tisco Stainless Steel, Wugang Trading and Rongshi International Holding, while leading sole deals for Bosideng International Holdings, UniTrust Finance & Leasing Corp, Goertek and Baoxin Auto Group. Sole mandates for Kingboard Laminates and Prosperity REIT in Hong Kong showed its repeat business capabilities.
StanChart also led some high-profile acquisition financings, including a US$2.425bn 18-month bridge for HKT’s takeover of CSL New World Mobility, the largest sole underwrite in North Asia during the review period. The bank was also sole MLA on a S$1.25bn (US$1bn) loan backing Singapore tycoon Ong Beng Seng and Wheelock Properties’ purchase of Hotel Properties.
The lender’s performance in South and South-East Asia was equally impressive with bookrunner roles on the bridge of up to A$2.6bn for Frasers Centerpoint’s takeover of Australand Property Group, the NZ$750m term loan for Philippines-based Universal Robina Corp’s purcahse of New Zealand’s Griffin’s Foods, the US$830m-equivalent acquisition bridge and term loans for Indonesia’s Solusi Tunas Pratama and a US$600m facility for Tata Motors.
StanChart also innovated in this region with a joint mandate on a US$350m revolver for port management company International Container Terminal Services, Asia’s first loan programme under bond-style documentation with 24 lenders participating, despite the change to an incurrence-based covenant regime from a maintenance-based one.
The bank also led high-profile deals in other countries, including a good mix of foreign and domestic currency loans, for the likes of Indonesia’s CT Corp (IFR’s Asia Pacific Loan of the Year), Malaysia’s SapuraKencana Drilling, the Philippines’ San Miguel, Thailand’s CP All, among others. It also led a debut Islamic financing for Garuda Indonesia and a refinancing in the asset class for Sri Lankan Airlines.
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