Asian loan markets look to build on Q4 momentum

Funding for Giant Interactive's take-private offer and CP All's refinancing among those in the pipeline.

Loan bankers expect a busy first half of 2014, building on the momentum seen in the fourth quarter when the volume of US dollar loans from Asia ex-Japan leapt by 75% year-on-year to $42 billion, according to Dealogic data.

Activity is picking up again after the December holidays. Among the deals banks are looking at is a loan to fund the take-private offer for New York-listed Chinese online game developer and operator Giant Interactive.

Yuzhu Shi, the company's chairman, together with an affiliate of Baring Private Equity Asia, made a $2.8 billion offer to take the company private in November, and has reached out to banks for funding. One source familiar with the matter said the loan could be about $700 million to $1 billion with a leverage multiple of about three to four times Ebitda.

Giant Interactive bears similarities to last year's high-profile $3.7 billion buyout of Focus Media but according to the source, it is a more difficult sell as there is less recurrent income. "While the business is profitable, it's an asset light business and it is hard to foresee what the revenue stream would be like or predict which games would be hits," he said. 

Other loan transactions include a refinancing for Thai supermarket chain operator CP All, which is expected to conclude by the end of this month. The Thai company will be refinancing the $6 billion bridge loan it took out to acquire Siam Makro. The terms are still being hammered out but most of the original seven lenders – Bangkok Bank, HSBC, Standard Chartered, Sumitomo Mitsui Banking Corp, Siam Commercial Bank, Krung Thai Bank and UBS – are expected to participate in the refinancing, which will include a baht tranche and a dollar tranche.

Elsewhere, Indonesian conglomerate CT Corp has mandated some 13 banks to arrange a $1.3 billion syndicated loan, which in part will refinance the $750 million loan taken to acquire a 60% stake in Carrefour SA in Indonesia in 2012.

Acquisition-related loans accounted for about 15% of total US dollar lending in Asia ex Japan in 2013, data from Dealogic shows. However, the bulk of the lending usually comes from refinancing, which is expected to remain the case in 2014.

Competition is expected to remain keen this year because European lenders such as Credit Agricole, Natixis, BNP Paribas and RBS have stepped up their lending in recent times, having repaired their balance sheets. However, the Basel III regime, which makes it more expensive for banks to lend, is expected to place a floor on how cheap loan financing can get.

"I expect pricing will bottom out," said one loan banker.

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