Shanghai Industrial InvestmentÆs HK$2 billion loan launched into general syndication

The five-year bullet deal, comprising of a revolver for the first 18 months and a term loan for the remainder of the facility, is priced at a margin of 48bp over Hibor.

The inclement weather in Hong Kong last week certainly did not dampen the enthusiasm of loan syndication teams at Bank of China, HSBC, ICBC, Hang Seng, SG & WestLB. Having been mandated to lead arrange a HK$2 billion five-year term loan for Shanghai Industrial Investment (Holdings) (SIIH), they launched the deal into general syndication last Friday. SG is the publicity agent for the transaction. General syndication will close on August 23.

Proceeds from the loan will be used to refinance existing debt and for general funding requirements. A major part of the proceeds will go toward retiring the five-year $300 million exchangeable bonds issued in 1997. Over $100 million of the bonds are outstanding. Shanghai Industrial Treasury Co., part of the same group, also issued $150 million of five-year exchangeable bonds in February 1998. Both the bonds are exchangeable into the share of SIIH's 60% Hong Kong-listed subsidiary Shanghai Industrial Holdings.

The five-year bullet deal, comprising of a revolver for the first 18 months and a term loan for the remainder of the facility, is priced at a margin of 48bp over Hibor. On the top level, co-arrangers receive management fees of 75bp (all-in of 63bp) for commitments of HK$150 million or above. The senior lead managers receive 67.5bp (all-in of 61.5bp) for commitments of K$100-HK$140 million, while lead managers receive management fee and all-in of 60bp.

SIIH last tapped the loan markets in October 2001, when it tapped a $300 million five-year term loan at a spread of 72.5bp over Libor. More recently, in April this year, its 60% Shanghai Industrial Holdings tapped a dual tranche five-year term loan and revolving credit deal to raise HK$1.6 billion, according to figures provided by Dealogic. That loan, priced at a spread of 45bp over Hibor, was raised to refinance another five-year loan for $300 million raised in June 1997 at a spread of 60bp over Libor.

The pricing also compares well with the loan deal of red-chip, Citic Pacific, which raised HK$2.4 billion last month paying a spread of 45bp and 51bp respectively for a five-and-a-half-year and seven-year facility.

Shanghai Industrial Holdings is the flagship of SIIH, the investment arm of the Shanghai municipal government. Shanghai Industrial Holdings has active interests in consumer products and retailing (including tobacco and commercial retail properties), medical and high-tech products (cancer drugs, DNA chips, cable television, ISPs, ATM networks, fibre optics), infrastructure and logistics (roads and expressways in Shanghai) and automotive parts.

In May 2002, Shanghai Industrial Holdings kicked off a three-stage plan to acquire a 60% controlling stake in EAS International Transportation Ltd (EAS) when it acquired a 25% stake for RMB265 million. EAS operates in 1,100 Chinese cities and has 3,000 employees in more than 90 offices in China, Hong Kong and Taiwan. Overseas, EAS maintains 9 branches in Europe and Southeast Asia, providing logistics services to more than 200 countries and regions.

EAS handles annual throughput including approximately 50,000 tonne of air cargo, 1.25 million units of forwarding, and 140,000 teus of marine cargo, that are worth about RMB2 billion (HK$1.87 billion). Shanghai Industrial Holdings is also reportedly in talks to invest in a Hong Kong logistics company and is expected to reach an agreement soon.

Its 64% subsidiary SIIC Medical Science also acquired a 56% stake in Xiamen Chinese Medicine for HK$38.87 million and also increased its stake in radiography equipment supplier E-COM Technology from 11% to 24%.

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