Singapore's Shangri-La Hotel made its debut in the syndicated loan markets when it signed a S$70 million ($40 million) loan last week. DBS Bank was the sole mandated arranger for the three-year bullet deal, which was priced at a margin of 52bp over the six-month Singapore dollar swap rate (Sibor).
With limited syndication for the small-sized facility, a number of banks showed interest as a result of which the deal was over-subscribed by 40%. DBS Bank had only invited two other banks to participate in the deal - NORD/LB (Singapore) and Bank of China (Singapore). But the arranger was overwhelmed with enquiries and calls from other banks wanting to participate in the deal and the actual level of over-subscription is likely to have been much more than 40%.
Shangri-La, however, did not decide to upsize the deal because it is cash-rich. Other names from the sector that have tapped the loan markets in the past include the Ong Beng Seng-controlled Hotel Properties Ltd (HPL) and Orchard Parade Holdings (OPHL). Shangri-La Hotel will utilize proceeds from the loan for refinancing existing borrowings, mainly in the form of bilateral loans, and fresh working capital.
Shangri-La Hotel's credit story is said to be much better than HPL and OPHL and in terms of hypothetical ratings would rank at least two notches above them. In March last year, HPL, led by OCBC, raised S$150 million through a five-year bullet loan at a margin of 112.5bp over six-month Sibor. OPHL, an affiliate of Hong Kong's Sino Group, borrowed S$195 million through a dual-tranche three-year loan at a margin 140bp. Citibank/SSB led that deal.
Earlier in March this year, Shangri-La Hotel's Hong Kong affiliate, Shangri-La Asia Treasury Ltd borrowed HK$3 billion through a five-year bullet loan priced at 41bp over six-month Hibor. The parent, Shangri-La Asia, guaranteed that deal. However, Shangri-La Asia, which is the 99.11% owner of Shangri-La Hotel, is not a guarantor to the latter's S$70 million loan. The loan has a negative pledge that restricts the borrower from creating any encumbrances on its hotel properties.