An $850 million buyout loan for Chinese online games company Giant Interactive was launched into general syndication on Wednesday. The five-year loan is underwritten by seven banks -- China Minsheng Banking, BNP Paribas, Credit Suisse, Deutsche Bank, Goldman Sachs, ICBC International and JP Morgan -- which have invited other banks to participate.
There are three tickets. For a mandated lead arranger title, banks have to commit $50 million or above and the all-in pricing, including fees and margin, is Libor plus 529bp. Lead arrangers have to commit between $35 million and $49 million for an all-in pricing of Libor plus 514bp and arrangers have to commit between $20 million and $34 million for an all-in pricing of Libor plus 500bp. The loan has an average life of 3.5 years.
The loan is expected to close syndication at the end of May and will be used to finance a take-private offer for New York-listed Giant Interactive.
The company is being taken private by a consortium group, which includes Giant Interactive chairman Yuzhu Shi, Baring Private Equity Asia and Hony Capital. Collectively, they own 49.3% of Giant Interactive shares and have offered to take Giant Internative private for $3 billion.
Baring and Hony Capital are funding part of the offer with cash, offering $12 per share. The acquisition is expected to close in the second half of 2014.
Giant Interactive is a leading online game developer in China and operates games such as ZT Online. The company’s net income for 2013 was Rmb1.3 billion ($207 million), up 26.1% on the previous year.
Shanda waiting in the shadows
Loan bankers are also awaiting a formal mandate for a buyout loan for another Chinese online games company, Nasdaq-listed Shanda Games.
Shanda Interactive Entertainment and an affiliate of investment firm Primavera Capital, which together own 76.2% of Shanda, made a $1.9 billion offer to take the company private in January.
Both deals have generated attention within investment banking circles due to the possibility of juicy margins. However, with both companies operating in asset-light sectors and users of online games quick to move on to new games, lenders are expected to have to pick between either of the two transactions.
“Both are in online games, which is not a traditional sector, and banks might struggle with limits if they are involved in both,” one loan banker said.