Wednesday, 20 March 2019

Taiwan Loan House

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In an overbanked, highly liquid and fiercely competitive domestic loan market, Fubon Financial Holdings used its structuring capability to bring stable Chinese companies to Taiwan’s loan market to satisfy local lenders’ demand for yield.

Wafer-thin pricing is a characteristic of Taiwan’s active and aggressive loan market and that usually forces many domestic lenders overseas to search of yield. However, the currency crises in India and Indonesia curbed Taiwanese lenders’ appetite for overseas assets during the review period.

It is a delicate task to balancing risk and reward in this environment and Fubon used its Hong Kong branch’s relationships to satisfy Taiwanese lenders. While rivals focused on high-yielding deals for lower-rated companies, Fubon brought quality borrowers from China to local investors.

“We capture the market dynamics ahead of competitors and develop proactive strategies towards such trends,” said Stephen Chen, Taipei Fubon Commercial Bank’s executive vice president.

Despite stiff competition, Fubon grew its market share in Taiwan to around 10% from 8% in 2012 and 6% in 2011. It was a bookrunner on 50 of the 90 deals in which it was involved during the review period, and acted as facility or security agent on 30 of them.

Notably, Fubon was the sole arranger of a four-year bullet loan for Chinese state-owned conglomerate Citic Pacific. The facility was targeted at Taiwanese lenders and was increased to US$330m from US$200m after support from 12 domestic banks.

Top-level all-in pricing of 275bp was richer than the 100bp–150bp that top Taiwanese firms usually pay, but it was similar to Citic Pacific’s borrowing cost in Hong Kong and helped the conglomerate diversify its banking relationships.

Fubon was also sole mandated lead for Guangzhou government-owned Yue Xiu Enterprises (Holdings). The three-year loan paid top-level all-in pricing of 260bp and was increased to US$280m from US$150m.

Fubon shared bookrunning titles with other banks on both deals, but originated them and anchored the syndication process. The bank also showed leadership in domestic and overseas structured financings and led seven of the top 10 structured loans in Taiwan.

The Taiwanese bank was one of three main bookrunners on the LBO refinancing for cable TV operator Taiwan Broadband Communications, and played a key role in structuring and syndicating the NT$27bn (US$904m) seven-year deal.

Outside Taiwan, Fubon and two other banks arranged a US$285m loan to refinance a US$200m LBO for Hong-Kong trust company OV Group. The loan, signed in May 2011, backed IK Investment Partners’ acquisition of Offshore Incorporations HK.

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