Shenzhen Investments mandates six banks for $150 million loan

General syndication for the five-year loan was launched yesterday.

Hong Kong mainboard-listed Shenzhen Investment Ltd has mandated six banks for a $150 million loan. The mandated coordinating arrangers are HSBC, DBS Bank, Commerzbank, ICBC, Bank of Communications and Hang Seng Bank. The book-runners for the deal are HSBC, DBS Bank and Commerzbank. Bank of Communications is the publicity agent, ICBC is the signing agent and Hang Seng will handle the documentation.

General syndication for the five-year loan was launched yesterday. The deal pays a margin of 85bp over Libor. The average life of the loan is four years. Being a dual-currency loan the borrower has the flexibility to draw on the facility in US dollars or Hong Kong dollars. On the senior level, for commitments of between $8 million and $10 million, the deal offers lead managers flat management fees of 60bp and all-in of 100bp. Managers committing between $5 million and $7 million will receive 44bp as flat management fees and all-in of 96bp.

Shenzhen Investments, the investment arm of the municipal government of Shenzhen in southern China's Guangdong province, is involved in property development, investment and management services, transportation services, infrastructure investment and information technology. The company derives nearly 80% of its revenues from its real estate business. The company recorded net profits of HK$353.3 million for the year ended 31 December, 2001, up 22.37% from the previous year.

Turnover for the year amounted to HK$1.36 billion increasing 13.92% over the year 2000. At the end of 2001, the company's debt-to-assets ratio stood at 32.36%, while total debt-to-equity ratio was at 76.13%. Shenzhen Investments listed on the Hong Kong stock exchange in March 1997 when it raised HK$462.5 million through the sale of 250 million shares at HK$1.85 per share. In December last year, the company sold another 50 million shares at HK$2.08 per share to raise HK$104 million for future investments.

The company will utilize the proceeds of the loan for refinancing and general working capital purposes. However, it is believed that part of the loan will go towards the acquisition of 60% of Shenzhen Pengji Holdings from Shum Yip Holdings. The acquisition will be financed by cash of HK$152.3 million and the issue of 60.85 million shares at HK$2.503 per share to Shum Yip Holdings. The deal, signed between the two parties in early March this year and yet to be completed, will see Shenzhen Pengji Holdings becoming a wholly-owned subsidiary of Shenzen Investments. Shum Yip Holdings will see its stake in Shenzhen Investments increase to 57.02% from 54.74%.

The loan is not the first time the company has accessed the loan markets. In its earlier incarnation as Shum Yip Investments, the company tapped a three-year term loan for $80 million in September 2000. Bank of East Asia and Societe Generale Asia were the mandated arrangers for the deal that was priced at a spread of 128bp over Libor.

That deal was launched for an initial amount of $60 million and subsequently increased to $80 million following over-subscription in the general syndication stage. Proceeds from the loan were utilized to refinance a $63 million three-year term loan signed in July 1997. The loan has a two-year extension option for the borrower. Up to 90% of the loan can be extended for a further two years for a 50bp extension fee.

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