Savvy shopper
CP Group completed Thailand’s largest loan and one of Asia’s most widely syndicated financings in the midst of the Covid-19 pandemic – a US$7.2bn-equivalent bridge loan to fund its purchase of British supermarket chain Tesco's Asian business.
Few would have predicted a final tally of 36 banks when joint underwriters JP Morgan, Siam Commercial Bank and UBS first approached the market in mid-March with the global financial markets reeling from the systemic shock of Covid-19.
Thai billionaire Dhanin Chearavanont’s CP Group won the race for the US$10.6bn acquisition just as the coronavirus was beginning to spread around the world. The pandemic forced lenders to focus on portfolio management and their core clients in their home markets, and it was far from clear that the syndication would be a success.
Despite the tightening liquidity conditions, Asian lenders flocked to the deal, committing unusually large amounts.
The financing had its first taste of success in senior syndication, even though the underwriters were seeking unusually large commitments of US$1bn or above. By the end of April, nine banks, of which eight were from Asia, had joined in senior syndication.
Four months later, the deal had lured another two dozen lenders in general syndication at a time when some of the other Asian credits, including top-tier borrowers, were facing difficulties in wooing lenders. In the final outcome, CP Group’s loan had four European lenders and three Thai banks participating, underscoring its widespread appeal.
The borrowing was the first M&A loan from Thailand's retail sector since a US$6.2bn-equivalent financing in March 2016 for beer magnate Charoen Sirivadhanabhakdi's retail unit Berli Jucker. It funded the purchase of a 58.56% stake in Thai hypermarket operator Big C Supercenter.
Although a few heavyweight lenders were missing from CP Group’s acquisition loan, the deal crossed the finish line comfortably even as Covid-19 infections escalated across Europe and the US.
The dual-tranche financing was well-structured and pivotal to the acquisition of Tesco’s 1,965 stores in Thailand and 74 outlets in Malaysia. The loan represented net debt-to-Ebitda of less than five times. Top-level all-in pricing of 234bp via a blended interest margin of 184bp over Libor and an average life of 1.22 years was attractive enough for participating lenders.
CP Group’s strong credit profile as Thailand’s premier conglomerate with interests in agriculture, food and retail as well as technology-driven industries such as e-commerce and digital added to the allure. CP Group’s subsidiary CP All, which is the borrower on a US$3.2bn-equivalent 12-month tranche A, is the largest listed private sector company in Thailand and the second-largest offline retailer in Asia Pacific.
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