In what appears to be the largest property financing in China, sole arranger DBS Bank has closed syndication for a $180 million dual tranche facility for Shanghai Hua Qing Real Estate Development. Allocations will be finalized this week for the three-year bullet transaction that comprises a $80 million loan and a $100 million standby credit facility.
Bank of China (Hong Kong), Commerz East Asia and Maybank have joined as underwriters with commitments of between $30-$40 million. Banks joining as senior managers are Agricultural Bank of China, Bangkok Bank, Wing Hang Bank and Xiamen International Bank with commitments of $10 million each.
Underwriters will receive management fees of 30bp for all-in of 90bp, while senior managers will receive management fees of 15bp for all-in of 85bp. Although being offered management fees of 6bp for all-in of 82bp to join as managers, the banks preferred to join as senior managers.
The margin on the loan is 80bp over Libor while the fee on the standby L/C is 80bp. The loan is 95% guaranteed by CapitaLand, Government of Singapore Investment Corporation (GIC), Temasek Holdings and Sino Land. The four guarantors along with Shanghai Nanjing Road Trading Centre are the shareholders of Shanghai Hua Qing Real Estate.
Observers feel that this deal will be one of the very few dollar-denominated deals to emanate from China this year. The prospects for dollar-denominated deals from the Mainland appear bleak as most property developers, including those from Hong Kong and Singapore, have preferred to tap yuan-denominated financing from the domestic banks in China to finance local projects.
For DBS Bank, this deal marks its second major transaction in China this year following a $72.8 million dual tranche financing it arranged for Shanghai PanAsia - Potential Paper in April. The financing comprised of a five-year $52.8 million amortizing term loan facility to refinance the outstanding of like amount borrowed under the company's $88 million term loan facility arranged in September 1997 and a one-year RMB166 million working capital facility to finance its working capital requirements.
Other banks participating in the dollar-denominated deal as lead managers included ING Bank, Shanghai Pudong Development Bank, China Construction Bank, Oversea-Chinese Banking Corporation (OCBC), United Overseas Bank (UOB). Hang Seng Bank and KBC Bank joined as co-lead managers. The US dollar tranche paid management fees of 55bp flat for the lead managers, while co-leads received 45bp.
Shanghai PanAsia - Potential Paper is the only foreign-invested newsprint paper producer in China and is considered to be the most efficient paper mill in the country with an annual production of 130,000 tonnes of standard newsprint. Shanghai PanAsia - Potential Paper is a joint venture between PanAsia Paper Co. Pte Ltd (56.12%), Potential Industries (32%) and Shi-Dongkou Economics & Trading Co (10.0%).
PanAsia Paper also owns production facilities at Singburi in Thailand and at Chonju and Chongwon in South Korea. PanAsia Paper also has exclusive distribution rights throughout Asia for newsprint manufactured by Canada's Abitibi-Consolidated and Norske Skogindustrier of Norway, the top two newsprint suppliers in the world.