When RGE Group company, Isola Castle, completed the acquisition of Hong Kong-listed Vinda International Holdings, in August 2024, it sealed one of the largest and most influential benchmark M&A deals in the Asia Pacific consumer market in recent years.
This transaction was notable in several ways. It was the largest cash privatisation in Hong Kong’s consumer sector for the past five years, as well as being the largest offshore renminbi (RMB) privatisation acquisition syndicate in the region in recent times.
The importance of these milestones for the future path of privatisations and syndicated loans locally and across Asia Pacific cannot be ignored.
“This M&A deal also contributes its influence on the introduction of foreign investment in China,” said Li Fang, general manager of the global corporate & investment banking department at the BOC Macau, which was the mandated lead arranger, bookrunner and underwriter, facility agent, documentation agent and security agent.
In short, the deal shows how the banks providing the syndicated loan assisted a multinational company to further develop its business in China, representing the bank’s confidence in economic development in mainland China, while also promoting the globalisation of the RMB across Asia Pacific, added Li.
Delivering the deal as planned
RGE’s main objective was to achieve synergy between its upstream and downstream paper companies, in turn enhancing its competitiveness in the Asia Pacific paper market.
Yet it was also able to succeed with smooth privatisation, thanks to the speedy preparation of funding and timely public announcements.
This called for close collaboration among the advisory teams to ensure RGE could announce its general offer within a very short timeframe. Ultimately, BOC Macau was able to design and confirm the key financing terms, invite banks to the syndicate, secure commitment from all lenders and execute the facility agreement all within a total of 42 working days – with the syndicated loan oversubscribed by over four times.
Inevitably, for a deal spanning so many markets, beyond a tight timetable participants faced unfamiliar jurisdictions. For example, with the syndicate, target group members involved mainland China, Hong Kong, BVI, Cayman Islands Bermuda, Malaysia and Indonesia, among others.
For Li, communication skills were crucial in the successful completion of this deal. “Our team comprehended the real requirements of clients and lenders. Finally, our team provided a financing structure that satisfied both of them.”
This included BOC Macau creating much-needed fund certainty – an achievement which, given the geographic spread of lenders, was essential in tackling mixed levels of understanding about China’s cross-border lending policies. The challenge was even more pronounced given the involvement of several onshore Chinese branches of syndicate banks, which were also unfamiliar with overseas financing structures and foreign laws.
Rather than be exposed to funding delays, BOC Macau designed a backstopping mechanism as a back-up.
According to Li, amid such complexity, it was important to keep a balance of interests between the client and the syndicate. For example, some lenders asked to remove some terms in the agreed termsheet to help the client to reduce any additional burden.
Time management was another important reason for the stand-out nature of this transaction. “RGE needed its own cash to be released effectively. To achieve the client’s goals, our team made a well-structured timetable to assist for expediting lenders’ credit approval,” explained Li.
Managing a currency mismatch
Another innovative element of the transaction required BOC Macau to solve a currency mismatch issue – which was vital in helping RGE optimise its financing costs.
Notably, while the loan was withdrawn in CNH rather than Hong Kong dollars, the offer was paid in the latter, resulting in a currency mismatch. In response, BOC Macau balanced its responsibility of remitting CNH to multiple FX counterparties without sacrificing transparency over the fund flows for the facility drawdown.
Rather than opening multiple escrow accounts with the FX counterparty banks, BOC Macau instead proposed an innovative swap currency approach directly with each counterparty bank.
“Solving the currency mismatch issue was a key aspect of structuring this transaction,” said Li. “It was particularly rewarding because our team used currency exchange to optimise the client’s financing cost.”
BOC Macau
BOC Macau, accounting for 40% market share in Macau, shoulders critical responsibilities including serving as the note-issuing agent bank for the Macau SAR, government treasury agent bank, chairman bank of the Macau Banking Association, clearing bank for Hong Kong dollar and US dollar bills among banks, and the RMB clearing bank.
Notably, in April 2019, the BOC Group established a head office-level Global Advanced Corporate Finance Center in Macau, positioning BOC Macau as a pivotal hub for cross-border advanced financing between mainland China and Hong Kong, Macau as well as other overseas markets. This centre offers diversified products such as leading international syndicated loans, M&A and leveraged investments loans, structured project financing, multilateral trade financing and other innovative solutions. This initiative has further propelled the development of Macau's modern financial industry, aligning with the SAR government's strategy to foster economic diversification and regional connectivity.
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