China Loan House, Hong Kong Loan House
Standard Chartered was the most active bank in bringing Chinese credits to the syndicated loan market in 2017 while its peers turned to club and bilateral transactions against the backdrop of a significant slowdown in deal flow.
Its success lies in a deep understanding of onshore/offshore market conditions, policy changes, a strong local team of client relationship managers and years of effort to expand its distribution capabilities.
“We have focused on offering solutions to our borrower clients, be that offshore fundraising or identifying available pockets of liquidity onshore.”
“With liquidity tight in the onshore market throughout the year, we have focused on offering solutions to our borrower clients, be that offshore fundraising or identifying available pockets of liquidity onshore,” said Julia Chou, StanChart’s head of loan syndications for Greater China & North Asia.
The bank forged relationships with new lenders, including regional branches of city commercial banks, and used the additional liquidity to strengthen its origination and distribution capability, as shown in a debut US$300m three-year amortising term loan for China Medical System Holdings.
StanChart won a sole mandate, underwrote and prefunded the loan before bringing in Hang Seng Bank and Nanyang Commercial Bank in senior syndication. The deal then attracted another 21 in general syndication, tapping liquidity from China, Hong Kong, Taiwan, Singapore, India, South Korea, Macau, Germany, Malaysia, Japan and Thailand. Of all the lenders, 20 are new to the client.
Such successful maiden voyages showcased the range of StanChart’s client base, and its ability to steer new borrowers through the syndicated market, but it also helped repeat clients navigate choppy conditions.
Chinese auto dealership Baoxin Auto Group mandated StanChart on its syndicated financing for the fifth time in five years, this time for a mega deal with an onshore/offshore structure. Despite a challenging credit story, StanChart was able to increase the three-year offshore tranche to US$837.4m from an original target of US$300m as efforts to deepen relationships with various Chinese banks again bore fruit. Half of the 22 banks it brought along are new lenders to Baoxin, now called Grand Baoxin Auto Group following its acquisition by peer China Grand Automotive Services.
StanChart brought six debut Chinese borrowers to the syndicated loan market during IFR’s review period, including China Medical System, Zhejiang Energy International and Tsinghua Unigroup. It also executed 11 sole mandates.
“We have prioritised our efforts this year to bring a number of debut names from new industry sectors to the market, across both privately owned and state-owned borrowers, which has required us to demonstrate both market leadership and confidence in our read of investor appetite,” Chou added.
Together with ANZ and DBS Bank, StanChart managed to bring onboard six other lenders to state-owned Zhejiang Energy International’s maiden US$300m three-year offshore term loan, despite the low all-in pricing of 100bp at the top level.
StanChart also handled acquisition loans in the real estate industry in the review period, arranging a Rmb742.5m five-year loan to back Macquarie Group’s purchase of a retail mall in Chongqing and another US$295m/Rmb153m onshore/offshore three-year facility to fund TH Real Estate’s acquisition of an outlet mall in Tianjin.
These two deals were done despite China’s overall liquidity tightening this year and the government’s crackdown on funding activities in the property sector.
HONG KONG LIQUIDITY
Standard Chartered outperformed competitors in Hong Kong despite a competitive backdrop, with abundant liquidity and a big drop in syndicated volumes.
Sponsor-led leveraged buyouts perked up in Hong Kong at the end of 2016, triggering intense competition among private equity bidders and lenders, and StanChart was among the frontrunners in event-driven financings. The bank, together with four Taiwanese lenders, acted as the mandated lead arranger and bookrunner of a HK$4.851bn (US$626m) senior loan backing the HK$9.5bn leveraged buyout of Wharf Holdings’ telecom business. The facility garnered an overwhelming response from a mix of 15 lenders, including Taiwanese, Chinese and Japanese banks, and paved the way for similar deals in 2017.
Demand for syndicated financing fell in the Asian financial hub last year as quite a few frequent borrowers turned to bilateral or club loans instead, but StanChart worked hard to bring new borrowers to the market, especially from the non-bank financial sector. The bank, along with three other peers, completed a swift syndication for Hong Kong-based brokerage Essence International Financial Holdings’ maiden HK$1.2bn facility in July. Commitments from 13 banks during syndication hit HK$3bn, triple an original target of HK$1bn.
Two months later, StanChart arranged a HK$4.5bn loan with China Everbright Bank for another Hong Kong brokerage, Sun Hung Kai Financial. That deal was oversubscribed by about 5x during syndication and attracted 16 lenders.
StanChart was also one of the 11 mandated lead arrangers for a HK$8bn three-year loan for Guotai Junan (Hong Kong), the largest financing for a non-bank financial institution in Hong Kong during IFR’s review period. The guarantor on that transaction is a unit of Guotai Junan Securities, China’s third-largest brokerage by assets.
StanChart committed to a wide range of financings from the real estate sector, at a time when some other market players shied away from property-related risks. It was the sole underwriter and bookrunner of a HK$3.519bn three-year loan backing Chinese property developer Agile Group Holdings’ acquisition of a 30% stake in a tourism development project in China’s Hainan province.
The bank was the sole underwriter and original mandated lead arranger and bookrunner of a US$550m three-year loan for Hong Kong-listed Shui On Land. That deal received a warm reception from 15 lenders including Chinese, Taiwanese and South-East Asian banks.
StanChart also demonstrated its syndication capabilities with deals for repeat borrowers and challenging pricing. Having been one of three underwriters on a HK$6bn five-year loan for Kingboard Laminates Holdings in March, offering a top-level all-in pricing of 116bp over Hibor, StanChart then underwrote a HK$5.5bn four-year capex loan for parent company Kingboard Chemical Holdings just eight months later, working alongside one other bank. Despite tight pricing on the holdco-level borrowing of 123bp all-in, the deal ended up oversubscribed, attracting 16 lenders in syndication.
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