Fosun talks €500m bridge with China lenders

Bank of China and ICBC are expected to arrange Fosun’s €500 million bridge loan to acquire the insurance arm of Portugal’s Caixa Geral de Depósitos

Fosun International is attempting to firm up a €500 million ($686 million) bridge loan for its acquisition of an 80% stake in the insurance arm of Portuguese state-owned Caixa Geral de Depósitos.

Bank of China and ICBC are expected to arrange the loan and both banks are seeking internal credit approval, according to a source familiar with the matter.

ICBC had provided a letter of guarantee for a large part of the €1billion acquisition, which was announced in January this year.

According to one banker not connected to the deal, the company had initially been looking at a pricing of about Libor plus 400bp to 500bp for a one-year facility and had been seeking financing from various banks, including foreign banks, but opted to go with Chinese lenders in the end. However, the person familiar with the matter said that the pricing and tenor had not yet been firmed up.

Fosun International is the Hong Kong-listed subsidiary of China’s largest private investment company Fosun Group and its chairman is billionaire Guo Guangchang. Guo co-founded the Shanghai-headquartered group with three university classmates in 1992, and was ranked the 34th richest person in China by Forbes in 2012.

Fosun International has been transitioning from an industrial company to an investment holding company, and looked at Berkshire Hathaway as a model.

As it transforms itself, Fosun has been active on the acquisition front over the past 12 months. In October last year, it bought 1 Chase Manhattan Plaza in New York from JP Morgan Chase & Co for $725 million.

It also made a joint bid to buy out Club Med with AXA Private Equity for €550 million last year. In addition, according to various media reports, Fosun International is one of the bidders circling Forbes Media, which has been put up for auction.

“Fosun is going through a number of leveraging steps,” said the banker not connected to the deal. “Banks are a bit concerned on the amount of debt they are taking on,” he added. 

Rating agencies have highlighted similar concerns. On January 13, S&P placed its BB+ rating on Fosun International on creditwatch with “negative implications”.

“Fosun's financial strength is likely to weaken beyond our base-case expectation for the rating if the company uses debt to finance its recently-announced acquisition of about €1 billion,” said S&P in its report at that time. However, it added that it believes that Fosun's liquidity is "adequate”.

As of June 2013, Fosun's cash and bank balances stood at Rmb21.6 billion ($3.5 billion). However, its total debt had risen to Rmb65billion ($10 billion) from Rmb56.9 billion in December 31, 2012, according to its results statement.

In the meantime, China's offshore acquisition spree has continued to offer more opportunities for loan bankers. “All these mega deals from the Chinese seem to be continuing which has been good for loan volumes” said the banker not connected to the deal.

¬ Haymarket Media Limited. All rights reserved.
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