Li Ka-shing-controlled Cheung Kong Property's three-year HK$55 billion ($7.1 billion) jumbo loan facility has attracted keen interest from banks, easily overcoming the market's nagging Chinese real estate concerns.
Expressions of interest for the bullet loan were due on Wednesday, and according to one source familiar with the matter, about 18 banks have expressed an interest, all targeting the larger ticket, which requires commitments of HK$5 billion or more.
This would put total demand for the facility at $11.6 billion at the minimum.
"There is strong support at the top level that surprised on the upside," the source said. "I think lenders are taking the view that the loan will be well supported in the senior phase of syndication and allocations will get scaled back."
The smaller ticket required commitments of HK$2.5 billion to HK$5 billion. The pricing for either commitment level has not yet been set but has been capped at Libor plus 115 basis points.
Cheung Kong Property, a company born from the reorganisation of Cheung Kong Holdings and Hutchison Whampoa, wants the funds to help repay the bridge loan used to buy up CK Hutchison Holdings’s development and rental property and hotels.
Cheung Kong Holdings and Hutchison Whampoa are being restructured into two new companies: Cheung Kong Property, which will hold all the property assets, and CK Hutchison Holdings, a diversified conglomerate with interests ranging from telecoms to ports and infrastructure. This reorganisation was approved by Cheung Kong Holdings's shareholders last week.
Chinese property markets have been going through a rocky time, with slowing sales and an oversupply of homes. Kaisa's near-default has also dampened sentiment. However, having the backing of Hong Kong's richest man clearly makes a difference as Chueng Kong Property, or CK Property, proves.
Among the lenders that have expressed interest in CK Property's jumbo loan are HSBC, ANZ, Scotiabank, Bank of America Merrill Lynch, BNP Paribas and the three Japanese lenders -- Mizuho, SMBC and BTMU.
The Japanese lenders have put in aggressive bids but the deal is expected to be priced at a level that other banks will agree to in order to clear the bridge loan, the source familiar with the matter said.
CK Property has not yet been rated but given its parentage, it is expected to be an investment grade name. The Li family trust will hold 30.1% of CK Property.
According to one lender who put in an expression of interest, the heavy hint at the lenders meeting was that CK Property would be rated A-, which would cap its gearing at about 20%.
However, Li-controlled companies including Hutchison Whampoa and Cheung Kong Infrastructure have been active in tapping loan markets to fund acquisitions and, as such, some lenders have hit limits on the amount they can lend.
CK Property will have development landbank of about 170 million square feet, including 158 million square feet in mainland China, 17 million square feet of rental properties, and more than 14,600 hotel rooms.