China Overseas Land & Investment (COLI) has registered a success for its HK$1.2 billion ($154 million) syndicated loan facility. Following over-subscription to the tune of HK$2 billion, the deal was upsized to HK$1.8 billion and closed last week. Signing is scheduled for July 23.
COLI will use the proceeds from the loan to refinance a $160 million loan that matures in September 2002. The five-year loan, tapped in September 1997, paid a spread of 100bp over Libor for the first three years and 130bp for the fourth and fifth year. That deal was also upsized from $100 million following over-subscription. Societe Generale was the co-ordinating arranger for that deal.
The present transaction pays a spread of 100bp over Hibor. The deal offers arrangers, co-arrangers and senior managers all-in margins of 116bp, 113bp and 110bp respectively. HSBC, ICBC and Bank of Communications are the co-ordinating arrangers for the deal, which has a maturity of five years with an average life of 4.5 years. Amortisation starts after the third year comprising of four semi-annual payments of 10% and a balloon of 60%. The final allocations are as follows:
China Overseas Land & Investment 5-year term loan |
|
Participating Banks | Amount (HKD) |
Coordinating Arrangers |
|
The Hongkong and Shanghai Banking Corporation Limited |
|
Industrial and Commercial Bank of China (Asia) Limited |
|
Bank of Communications, Hong Kong Branch |
|
Lead Arrangers |
|
The Hongkong and Shanghai Banking Corporation Limited | 270,000,000 |
Industrial and Commercial Bank of China (Asia) Limited | 270,000,000 |
Bank of Communications, Hong Kong Branch | 225,000,000 |
Hang Seng Bank Limited | 90,000,000 |
Arrangers |
|
Bank of China (Hong Kong) Limited | 180,000,000 |
Co-Arrangers |
|
China Merchant Bank | 108,000,000 |
Bank of East Asia Limited | 90,000,000 |
Bank of China, Singapore Branch | 90,000,000 |
BNP Paribas | 90,000,000 |
Nanyang Commercial Bank, Limited | 90,000,000 |
Senior Managers |
|
Wing Hang Bank | 72,000,000 |
CITIC Ka Wah Bank | 45,000,000 |
Fortis Bank | 45,000,000 |
Luso International Bank | 45,000,000 |
United Overseas Bank | 45,000,000 |
Wing Lung Bank | 45,000,000 |
TOTAL | 1,800,000,000 |
COLI, a Hong Kong-listed company, is the flagship of China State Construction and Engineering Corporation (CSCEC), the largest construction company in China. COLI is primarily engaged in property development and construction, investments in securities and provides civil engineering and real estate management services. COLI recently proposed to provide new indemnity to financial institutions issuing performance bonds on behalf of CSCEC and its wholly-owned subsidiary, China State Construction Engineering (Hong Kong) (CSCE). When bidding for public construction and engineering contracts, bidders are required to present bonds as surety for satisfactory performance of the contracts and as proof of their financial ability to fulfil the capital commitment under the contracts.
The new indemnity proposed by COLI amounts to a maximum of HK$2 billion for a duration of six years and is double the existing indemnity provided by COLI in terms of amount and duration. The bonds can be used as surety for all contracts related to public and private sector projects, while the existing indemnity only covers public contracts.
The new indemnity represents 24.88% of the audited consolidated net tangible asset value of the company as at 31 December, 2001. The new indemnity covers liabilities, losses and expenses that may result or be incurred by the financial institutions in connection with the performance bonds. COLI will seek approval from its independent shareholders at an extraordinary general meeting. COLI is 57.15% controlled by China Overseas Holdings Ltd, a company incorporated in Hong Kong and wholly-owned by CSCEC.
Although, COLI will not receive any direct fees for providing the new indemnity, it will derive management fee income by facilitating the businesses of CSCEC and CSCE. In the past two years ended December 2000 and 2001, COLI received management fees from CSCEC and CSCE amounting to HK$248.6 million and HK$268.9 million respectively. For the year ended 2001, COLI registered net profits of HK$411.49 million, a 53.5% increase of the previous year.
This was mainly attributable to the HK$347.68 million gain from the disposal of its entire shareholding in Hong Kong-listed Ryoden Development for cash consideration of HK$341.53 million. The gain is arrived at after accounting taking into account the investment property revaluation reserve and and negative goodwill on consolidation amounting to HK$127.65 million transferred from reserves on disposal. The proceeds were utilised to acquire a 100% interest in a subsidiary of Ryoden for HK$341.53 million. The acquired company is a beneficial owner of a 60% interest in a PRC company that is primarily engaged in the development of a property project.
