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Friday, 19 July 2019

China Loan House

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In a year when restrictions on capital outflows and geopolitical tensions made event-driven financings from China few and far between, China Citic Bank stood out from its peers with bold underwrites on two high-profile outbound M&A loans totalling over US$7bn.

Citic Bank was sole underwriter on a US$3.5bn loan in October for Chinese miner Tianqi Lithium’s US$4.1bn acquisition of a 24% stake in SQM, the world’s No. 2 lithium producer. Four other lenders joined the facility, demonstrating Citic Bank’s ability to both lead and syndicate complex event-driven financings.

It followed close on the heels of a €3.07bn (US$3.57bn) facility for Chinese auto firm Zhejiang Geely Holding Group in July. Citic Bank jointly underwrote the loan with BNP Paribas to support Geely’s purchase of an 8.2% stake in Swedish truckmaker Volvo.

“We focus on providing financing solutions for M&A deals to clients. That is the key driver of our corporate banking strategy,” said Dong Yi, deputy general manager of China Citic Bank’s M&A finance department in Beijing. “It has proven to be a successful business strategy for us.”

As well as beating heavyweight rivals to the mandates, Citic Bank needed to manage its risk, ensuring that loans were well structured and priced to clear the market.

The Geely financing was particularly challenging, as news that its chairman had built a US$9bn stake in German automaker Daimler added to concerns that the company was being too aggressive in offshore acquisitions.

However, seamless collaboration between Citic Bank’s teams in its Beijing headquarters and Hong Kong subsidiary Citic Bank International ensured smooth execution, with 14 other lenders joining the syndicate.

Citic Bank first made waves in the international loan markets with its audacious US$30bn sole underwrite for China National Chemical Corp’s SFr43bn (US$43.45bn) takeover of Swiss seeds and pesticides producer Syngenta. That loan eventually ended up as a US$12.7bn recourse bridge loan a few months later, and Citic Bank was back in action as one of the key MLABs in March 2018, when ChemChina wrapped up a US$5.5bn takeout.

Its success with ChemChina helped Citic Bank nab the mandates on other event-driven financings.

“Our outstanding business capabilities and excellent service quality won credibility and trust from clients and partners,” said Raymond Wong, general manager of structured finance at Citic Bank International in Hong Kong. “We have been able to compete with international and domestic banking giants to win the mandates on a number of remarkable M&A financing deals.”

Citic Bank’s other deals included a top-line role on the HK$29bn (US$3.69bn) five-year dividend recapitalisation and amendment and extension deal for Chinese shoe retailer Belle International Holdings in September.

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To purchase printed copies or a PDF of this review, please email gloria.balbastro@tr.com .

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