The Hong Kong banking community has shown once again what a flexible friend it can be to the Li Ka-shing empire with the provision of an unprecedented $12 billion to fund the leveraged acquisition of Hong Kong Telecom by Pacific Century Cyberworks (PCCW). Yet far from baulking at having to stump up over double the amount of Asia's previous record breaking $5 billion loan for Japan Tobacco last year, banks were almost falling over themselves to secure lead arranger slots. Most saw a once in a lifetime opportunity to make an awful lot of money in return for what was perceived as very little risk.
For many banks, providing credit to Li Ka-shing is akin to lending to the Hong Kong government, or even better, the puppet which pulls its strings. And while the son's internet start-up might have little cash flow or credit history, the opposite rings true for Hong Kong Telecom over which the deal was eventually secured.
For the four lead arrangers - Bank of China, Barclays, BNP and HSBC - the returns were indeed impressive. From a total fee pot totalling at least $90 million, Bank of China managed to secure at least $36 million, with HSBC receiving $26 million, Barclays $16 million and BNP $11 million. For the latter two it was said that the windfall meant they had made their entire annual fee budgets in one fell swoop.
The rest of the arranger group, however, felt a little short-changed. After salivating at the prospect of making $10.5 million from underwriting $1 billion each, the 18 which agreeed to do so were told that they would be scaled back to $242 million because of heavy oversubscription.
However, as one banker subsequently pointed out, "$2.5 million for about three days work is hardly to be sniffed at".