Bankers are starting to negotiate the term sheet for a HK$5 billion ($641 million) loan for Hutchison Global Crossing (HGC). Market sources confirm that three banks - Citibank, SG and Commerzbank - have an unofficial mandate for the company's first Hong Kong dollar deal. The term sheet is being finalized prior to a mid-November launch.
The loan is definitely going to be non-recourse to the company's main shareholders - Hutchison Whampoa and Asia Global Crossing - who each hold a 50% stake in the joint venture. It will likely be similar in structure, tenor and price to a HK$4 billion loan taken by Hutchison Telecom in April 2000. That deal was non-recourse to Hutchison Telecom's main shareholders, Hutchison Whampoa, NTT Mobile Communication Network and Motorola.
Key to the new deal's success will be the pricing. Sources claim that the lead banks won the deal on the basis of sub-100 basis point spreads, which could prove tricky to achieve. Firstly Hutchison Whampoa is in the market with a mammoth GBP 2.5 billion -GBP 3 billion deal that will part finance its UK 3G activities, including the purchase of a very expensive 3G license.
Given the global pessimism towards 3G in the equity, bond and loan markets, pricing for this deal could be on the expensive side. The HGC deal would probably have to be priced wider than that level, given the relative credit of Hutchison Whampoa and its joint venture partner, Asia Global Crossing.
As a result, bankers are saying that HGC might try to close its deal before the Hutchison sterling deals goes out. This would also enable the company to take advantage of the present liquidity in the Hong Kong loan market. Banks in Hong Kong are flush with money at the moment for a variety of reasons including the stockpiling of cash prior to the PCCW refinancing. HGC might try to take advantage of this window of liquidity and beat both its parent and its competitor to the market.
Neither HGC nor any of the banks involved would comment.