Hopewell comes back

Following a 10 year hiatus, Sir Gordon Wu''s flagship looks to the loan market for funds.

Hopewell Holdings is looking to raise HK$2.5 billion ($320 million) five-year credit. Bank of China, China Construction Bank and Citigroup won the mandate and launched the deal into general syndication earlier this week. Invitations have been sent out offering a margin of 45bp for an all-in yield of 53bp to banks committing at the top tier. This is significantly less then the 86bp paid out on its last publicly syndicated deal, a $108 million financing - however this was completed back in 1994. Although Hopewell Holdings has been quiet in the open market, it has raised funds through a series of bilaterals and club deals, the last of which was as recent as June 2001.

BOCI Capital and Citigroup arranged a HK$1.38 billion ($177 million) six-year club loan that paid an all-in of just over 107bp. Despite this reduction in funding costs it still leaves Hopewell outside the blue chip property heavyweights in Hong Kong.

Cheung Kong paid 43bp for its HK$2.4 billion ($308 million) five-year facility in March and the HK$2.3 billion ($295 million) deal for Swire was priced at 39.5bp to the market. Market observers point out that the spread is tighter than several other property related deals and is far below that paid on any of its outstanding HK$2.95 billion ($378 million) debts.

Many agree that the pricing differential is small considering Cheung Kong carries a rating of A- from S&P, some five notches higher than the BB- Hopewell was awarded in early 2000. Analysts suggested that the lower pricing was linked to a variety of factors including the low interest rate environment and the recent news that profit increased 82% year on year for 2003.

While there were a number of one off gains that attributed to this rise, a large portion was based on the 21% increase in income derived from its toll road business. Further good news that is likely to aid a successful syndication is the number of new projects that the company has in the pipeline.

These include the construction of a hotel in Wan Chai and logistics centres in both Guangzhou and Hong Kong. Bankers are also hopeful that the participation in this financing may provide future opportunities to be involved in these potential ventures.

Most are looking at the chance to get involved in any financing related to the proposed Hong Kong to Macau and Zuhai toll road that has been put forward by chairman Sir Gordon Wu. As with all recent Hong Kong property deals, there are syndicators who believe that the deal is priced on the tight side, especially considering that this borrower has been away from the markets for such an extended period of time.

Many are also concerned with the possible impact on business opportunities if the feared SAR's resurgence emerges later on this year. In addition some can see no upside to joining in the hope of procuring further business linked with the proposed highway project.

The borrower has already spun off its infrastructure assets, raising HK$3 billion ($385 million) through an IPO earlier this year. Other bankers suggest that this is unlikely to hamper the syndication prospects as the size is not particularly large.

Furthermore Chinese houses awash with excess liquidity are more than willing to hold onto large tickets in case of any shortfall. Dealogic figures show that Bank of China has already committed in excess of $110 million to the borrower.

As this loan will refinance some of this amount it is likely to be able to reinvest a large portion of this to the new fundraising. Responses from banks are due in about three weeks.

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