As our readers are aware, to adjudicate this category we construct a ôhypothetical clientö situation. Our client this year was a Hong Kong-based professional CEO of a company and a non-resident Indian. The client had an existing asset base of $10 million including $2 million of insurance and a 3,000 square feet apartment in the mid-levels in Hong Kong. Specific concerns the client had related to healthcare costs for an aged mother-in-law who has no insurance cover and resided with the family in Hong Kong, under-graduate and post-graduate education costs in the US for a teenage son, marriage costs for two teenage daughters and retirement planning (assuming 5-10 years more of working life). The client was specifically interested in understanding alternative asset classes and was contemplating retirement either in Singapore, or as is increasingly the case for NRIs (non resident Indians), in India.
Our pitches all had some noteworthy points. Some banks made an interesting assumption that wealth planning needed to incorporate the high likelihood of the teenage son choosing to settle permanently in the US, post his education there. One bank was bullish enough on the potential of property in India to suggest buying a retirement home as well as investment land û and had enough insight on the India property market to narrow down on localities and rental returns. All banks had interesting ideas on increasing exposure to alternative assets, with some offering proprietary solutions. However, on an overall basis, UBS emerged as the winner again, an interesting outcome when one considers the bank does not yet offer wealth management services onshore in India, as it is still awaiting a license.
UBS made some interesting calls while structuring the hypothetical portfolio, including a radical one of liquidating the Hong Kong property. This was on account of the bankÆs view that both Singapore and India property would deliver better returns. In India UBS recommended investing in physical property and in Singapore in REITs, given the complexities involved in managing too much physical property. A winning recommendation from UBS related to an offshore life insurance policy designed to maximise tax efficiency post retirement û this was especially useful in the eventuality of retirement in India where tax rates are high.
We must also make note of an intangible in giving this award to UBS. The experience and maturity of the UBS team in the area of private banking was evident in all meetings and the resultant ôchemistryö û critical to a private bank-client relationship û worked in the bankÆs favour. Coupled with creativity shown in structuring a solution, UBS had just the edge required to once again win this award.
Highly commended: Citigroup
Best Private Equity Firm
The trend which has characterised financial markets in Asia this year has been the increasing influence exerted by private equity firms. The natural progression of Asian markets towards more mature American and European markets which have an active private equity presence has been much faster then anyone û including the bankers û could have anticipated. Against this backdrop, we thought it was timely that we institute an award for the best private equity house. For the purposes of this award we have looked at firms which focus on buyout activity, bringing into play their understanding of companies and markets to extract value. To judge this category we solicited feedback across the board about the activity financial sponsors have been engaged in this year. We added to this our own knowledge of announced and closed deals. Finally, the contest came down to TPG Newbridge and Carlyle (although a number of people we polled pointed to KKR, as an example of a firm which has gained traction within just a few months of establishing an Asia office).
We are pleased to select Carlyle as private equity house of the year. In 2006 Carlyle has continued to be active in North Asia. It has also enhanced focus on India though it is yet to close a deal there. CarlyleÆs largest successes this year were in Taiwan. In 2006 it completed its investment in Eastern Multimedia Company, TaiwanÆs largest cable TV operator. This represented AsiaÆs largest buyout transaction at the time. It also exited its investment in Taiwan Broadband, which it sold to Macquarie Media. Carlyle is a shareholder of Focus Media and benefited from the acquisition made by this firm of Target Media. And in November it offered $6 billion to acquire and delist Advanced Semiconductor Engineering, in a deal which has been described by pioneering across the industry.
M&A bankers we spoke to complimented Carlyle on its track record and the value of its franchise in the region.
Financial Law Firm
Lawyers across Asia benefited from the rising tide of deals in 2006, but none more so than Linklaters, which shaded the competition thanks to a good spread of work across its entire Asia network and its aggressive commitment to the region.
Even so, the decision was far from an easy one. Freshfields provided the editors with one of the thorniest problems. The firm may have withdrawn from Singapore in 2006 (and Bangkok in 2005), but its domination of this yearÆs landmark Hong Kong IPOs would easily have earned a China practice of the year award, if we had such a category. Alas, we do not.
Likewise, momentum practice of the year could have gone to Herbert SmithÆs US capital markets team, which has landed some significant mandates since hiring John Moore from Goldman Sachs in 2005.
But with only one law firm award up our sleeves we focused on those firms that deliver the highest quality across the broadest platform. In 2006, Linklaters came closest to the mark. At the same time, the firm also showed its ambition; hiring Chin-Chong Liew, a derivatives partner, from Allen & Overy this year and corporate partner Paul Chow from Slaughter and May, not forgetting the entire Clifford Chance structured finance team in 2005.
The pick of LinklatersÆ deals included a raft of convertibles, as usual, such as the $750 million Khazanah Islamic exchangeable in Malaysia, as well as pre-IPO deals for Greentown China and Golden State, and the $1 billion bond offering for PSA in Singapore. But one of LinklatersÆ successes in recent years has been to give its associates something besides convertibles to work on. On the equity side it advised on the $2.4 billion IPO of China Merchants Bank, the $1 billion Macquarie Korea Infrastructure Fund IPO and the MCB Bank GDR offering from Pakistan. Its M&A team acted on the aviation industry reorganisation involving Air China and Cathay Pacific, TemasekÆs acquisition of a stake in Standard Chartered, AA InvestmentsÆ offer for Asia Aluminum Holdings and the strategic alliance between SK Telecom and China Unicom.
Project Finance House
In a very short period of time since it commenced this business in mid-2003, Standard Chartered has established a leading project finance franchise across its footprint in Asia, the Middle East and Africa. It has 30 professionals covering the Asian region from Karachi to Seoul. It will finish this year high in the Asian league tables, having seen a fourfold increase in the number of deals it has done. Standard Chartered has shown a growth rate faster than the market has grown, which reflects that it has been able to win business from its competition.
The bank prides itself on being able to structure tailor-made and innovative solutions for clients. Standard Chartered currently has 18 deals under execution. To provide the best advice to its clients, Standard Chartered operates through specialised industry teams in oil and gas, chemicals, mining and metals and renewable energy.
Standard Chartered was a bookrunner and mandated lead arranger for our project finance deal of this year, Reliance Petroleum, a deal which is the largest limited recourse financing in Asia since the 1997 financial crisis. It was also the mandated lead arranger and documentation bank for BP and CNOOCÆs Tangguh LNG project, as well as being a mandated lead arranger and financial advisor on Sonangol Sinopec û in which the Chinese oil firm is investing in Angola. Another interesting China deal was its acquisition financing for ChemChina of AustraliaÆs Qenos û a non-recourse deal. Other important deals completed include Cairn Energy (India), Universal Terminals (Singapore) and the wind power financing for Dongkuk Industries in Korea.
Best Cash Management Bank
Citigroup has again proved its standing in 2006 as AsiaÆs top cash management bank, once again leading an increasingly competitive and highly skilled group of competitors in the region. In 2006 the bank continued to fire on all cylinders, greatly expanding its client base, rolling out an immense number of new and innovative cash products and enhancements in Asia and building on its number of cash professionals in the region.
In the first 10 months of 2006, Citigroup hit all the right buttons, winning a massive amount of new and incremental business. The bank was awarded an impressive 2,163 new mandates in 13 Asian markets with a value of over $70 million. With regards to incremental mandates, Citigroup also expanded dramatically on 2005Æs totaling, picking up 2,024 mandates in Asia ex-Japan and Oceania valued at $64 million.
Market-wise, the bank performed very well in all major Asian countries, with Singapore, India and China leading the way in terms of deals won (both new and incremental business) and dollar value.
In regards to products, Citigroup continued to excel regionally, rolling out more than 400 complex new products and enhancements in Asia, including many market-specific functions. On its TreasuryVision platform, which was launched in 2005, the judges were impressed by CitigroupÆs addition of comprehensive account management and contact management account functions and its dealing functionality that allows corporate treasurers to meet internal demands for foreign exchange cover, placement or short-term requirement for money. On the liquidity management side, its Against-the-Sun Sweep product, which moves cash balances eastward and provides same day value of US Dollars and euro for Asia-based clients also impressed.
In addition, the bank also enhanced CitiConnect, its online payment platform, for the public sector to include functions such as customs, revenue and excise tax, which paid off in several Southeast Asian markets. As one government official noted: ôWe mandated Citigroup as we value its leading edge technology and the breadth and depth of its coverage and solutions. Other main reasons for choosing Citigroup were its professional team that demonstrated keen understanding of our requirements, experience in CitiConnect implementation with other government agencies and the number of CitigroupÆs customers pipelines in use this service.ö
Best Cash Solutions Bank
Citigroup for Roche
Citigroup takes this award for the first time, completing a sweep of both cash management titles. Judging by this yearÆs submissions, two or three rival banks could have easily won this award in any other year, but CitigroupÆs solution for healthcare company Roche proved to be an exceptional solution thanks to its sheer scale and geographic reach.
Prior to being awarded the mandate, RocheÆs operations had largely been in-country involving banking relationships with numerous international and local banks, which the Swiss-based firm desperately wanted to change û due to its plan to revamp its cash management platform.
In January, Citigroup was mandated for what is understood to be one of the most comprehensive cash management RFPs ever conducted in Asia, wherein Roche was looking to implement a solution covering payables, receivables and liquidity management across 17 countries regionally, including complex markets such as Cambodia and Pakistan.
In addition to these requirements, Roche was looking to expand the scope of its In House Bank (IHB) to oversee Asia-Pacific. This required cash pooling, centralised reporting through its SAP instance server, standardised third party payments through Native iDoc payment files for all countries in Asia-Pacific, inter-company settlement and inter-company foreign exchange. All were addressed.
ôThe key reason for reviewing banking arrangements in Asia-Pacific was the planned introduction of our In House Bank in Asia-Pacific and the opportunity to standardise and simplify processes, reduce the number and value of external bank transactions and reduce costs,ö says Martin Schlageter, head of global cash management at Roche. ôThe implementation so far has exceeded our expectations: it has been smooth, delivered within the timelines set and well resourced by Citigroup.ö
Implementation of the full solution will be completed in January 2007 but Citigroup has already opened accounts in 15 countries, established centralised reporting for all bank accounts, implemented a domestic, regional and cross-regional liquidity management solution. It has also gone live with two host-2-host connections for RocheÆs pharmaceuticals and diagnostics divisions, which co-exist regionally as separate legal entities in most countries complete with different organisation structure and technology infrastructure.
Best Trade Finance Bank
For a bank to defend its title on a yearly basis is no mean feat, for the same bank to consistently excel for 10 years straight is a testament to its ongoing brilliance. Within the trade finance space, HSBC has again set the bar by pushing through numerous products and initiatives while again expanding and innovating on vanilla type of products such as letters of credit (LCs).
Although volumes of LCs in the industry are slipping regionally and globally, HSBC again dominated the LC space on the back of its electronic platform, which allows it to charge lower fees than some other banks. In terms of LCs outstanding, HSBC expanded by 15.7% and it is seeing healthy growth contributions in the volume of LCs issued and amended, negotiated and advised on. It also claims to have won LC market share in 16 Asian markets in 2006.
In total, HSBCÆs overall trade turnover will equal $177 billion in 2006 and like other trade finance banks, it made significant inroads in the open account space. Within its open account customer base, its factored export finance posted significant growth for the year, as did its open account export receivables finance volume.
In particular, the launch of its HSBCnet-Supply Chain Solutions (SCS) with open account gives customers a single portal with which to interact with the bank and their supplier base. Under this platform, customers can also gain access to purchase order distribution and reconciliation, which grew by 83% in 2006 and obtain post-shipment finance online, among other features. The year also marked the completed roll-out in 20 Asian countries of HSBCnet-Internet Trade Services (ITS), which integrates with customersÆ cash management and treasury activities on HSBC's core online platform.
Although the vast majority of its customers are still in Hong Kong, the bank made significant inroads in India, China and Malaysia in terms of customer account growth. When volumes are concerned, India was the market where HSBC experienced the most growth, followed by Korea and Thailand. According to one satisfied client testimonial: ôWe required a bank with a thorough understanding of the Chinese market and extensive appetitive for China bank risk and HSBC met both of our criteria. HSBCÆs electronic banking platforms have enabled efficient tracking of all activities relating to our LCs and we have been able to tap into their knowledge of local practices to help us in our business.ö
Best Trade Finance Solutions Bank
JPMorgan for Aban
JPMorgan has picked up this award for the third year running on the back of yet another innovatively structured solution, this time applying its network trade concept to Indian offshore oil and gas drilling company Aban. Under the solution, JPMorgan is the sole provider of $104 million, two and a half year construction period pre-delivery finance for an oil rig purchase by Aban from PPL Shipyard in Singapore, satisfying both the construction and installation and saving the Indian firm substantial financing costs.
The solution was unique for a number of reasons. Firstly, similar purchases are usually financed by pre-export finance, project finance or asset finance, which typically increase the gearing ratios of either the buyer or the seller and result in overall higher financing costs. Secondly, the JPMorgan structured trade team worked with both the buyer and seller as well as the issuing bank, to provide financing guaranteed by Indian Overseas Bank (IOB), which was a key differentiating factor in winning the deal.
The solution was hatched because Aban did not want to establish a loan on its books prior to the rig delivery in 2008, preferring instead to establish this loan when the asset is delivered and rental agreements are in place in order to obtain more favourable loan terms. Additionally, the Indian firm preferred not to use LCs as operative instruments due to restrictive terms.
On the other hand, PPL also rejected traditional pre-export financing methods in favour of a custom-made solution which would classify payments from Aban as advances against the contract, which JPMorgan has delivered.
Using IOB to guarantee financing, JPMorgan was able engineer a solution wherein payments would not be a loan to Aban, but at the same time classifying this component as an advance payment for PPL. At the same time, the JPMorgan solution strengthened IOBÆs position with Aban.
Compared to costs associated with traditional pre-construction asset financing, this pre-financing solution will save Aban a projected $3.5 million over this lifecycle, which is equivalent to 2.5% per annum.