HSH upsizes loan deal before launch into general syndication

Strong demand from banks in the sub-underwriting demonstrates rarity value associated with a borrower returning to the loan markets after two years.

HSH Finance, the funding arm of the Hongkong & Shanghai Hotels group, has upsized its five-year term loan deal to HK$1.8 billion ($231 million) from an original size of HK$1.5 billion. Four banks have already joined the transaction in the sub-underwriting stage for the deal led by mandated coordinating arrangers and bookrunners Bank of China, HSBC, Standard Chartered and Sumitomo Mitsui Banking Corporation (SMBC). Bank of China is the signing agent, while Standard Chartered is the facility agent. SMBC, apart from handling the publicity and documentation, is also coordinating the syndication process.

General syndication is likely to be launched this week and slated for close by the end of September. The deal was launched into sub-underwriting in early September. The strong demand from banks for the deal in the sub-underwriting stage demonstrates the rarity value associated with the borrower, which is returning to the loan markets after two years. More importantly, it reflects the confidence in the guarantor to the facility.

Hongkong and Shanghai Hotels, which guarantees the loan, owns a 100% stake in the borrower. The guarantor operates and owns the luxury Peninsula hotels in Hong Kong, Bangkok, Manila, Beverly Hills New York and Chicago. Hongkong and Shanghai Hotels is approximately 59% owned by the Kadoorie family.

The pricing for the loan is said to be in the mid-to-high 50bp over Libor. Proceeds from the current deal will go toward refinancing a HK$2.5 billion loan. That loan tapped in June 2000 paid a spread of 98bp over Hibor. That deal was also upsized from an original size of HK$2 billion to HK$2.5 billion. Pricing for the current deal is close to that of the seven-year deal tapped by Peninsula Hotel Ltd. in July 1997.

The HK$1.65 billion deal, also upsized from an original size of HK$1.5 billion, paid a spread of 62bp over Hibor or 57bp over Libor, according to figures provided by Dealogic.

The current deal is very much in a position to be closed and does not require to be launched into general syndication. However, the borrower is believed to have good relationships with a number of banks, which would be looking to enter the deal during the general syndication. That could possibly lead to the deal being upsized, should the borrower wish to do so when general syndication is closed in the end of the month.

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