Swire Pacific steps up to the plate

Cut throat enviroment continues as pricing is pushed down another notch.

Swire Pacific has become the latest Hong Kong blue chip to look for funds, launching a HK$2 billion ($256 million) five year revolver late last night. Mandated arrangers HSBC and Standard Chartered fully underwrote the deal.

Banks have been invited to join at a margin of 32bp over Hibor and on one of three fee levels. Co-ordinating arrangers pledging HK$200 million ($25.6 million) or more gain 37.5bp, lenders contributing HK$100 million ($12.8 million) to HK$190 million ($24.4 million) earn 32.5bp and the title of arranger while co-arrangers receive 27.5bp for HK$50 million ($6.4 million) to HK$90 million ($11.5 million) tickets.

Once again bankers have commented that pricing is extremely tight at just 39.5bp all-in for five years. This is some 9bp less than Hongkong Land is offering on its HK$4.7 billion ($600 million) seven year credit and 11.5bp less than Hutchison is paying on its HK$3.8 billion ($487 million) five-year deal.

Market observers were not surprised at this pricing level as competition for the mandate was fierce. One banker speculated that the mandated price may have been as low as 41.5bp, far tighter than on any of the other recent facilities.

These low levels have not caused any problems for arrangers as the response from the market continues to show that appetite is still strong. Although there have been no vast oversubscriptions banks have been more than willing to take and hold significant tickets.

Some sources claim that four or five banks have already made HK$200 million ($25.6 million) commitments to the relatively richly priced Hutchison deal. They add that some investors may be wary of committing more funds to another Hong Kong borrower in such a short timeframe.

Officials close to the facility dismissed talk of crowding out between these three assets claiming that investors would be willing to get this credit on their books as there have been few blue chip financings over the year. They say that Hutchison was required to pay a premium as it is a regular visitor to the market.

Many Hong Kong banks have already got a substantial amount of the groups debt on their balance sheets. Furthermore its Eu1 billion bond issue was priced earlier this week which will increase the its outstanding debt even more. In addition they highlight the fact that the borrower has not raised funds since August 2001 when it successfully completed a HK$5 billion ($640 million) five year deal that paid 39.61bp to underwriters.

A total of 11 banks lent to this financing at the underwriting stage and the facility was not even launched into general syndication such was the response. Unlike Hutchison the borrower has only one additional loan facility outstanding, a HK$1 billion ($128 million) credit from 2000 that is due to mature in December of this year.

This deal paid an all-in of only 32bp for three year money – less than this transaction, albeit for a shorter time period. Bankers point out that although there maybe only two borrowings under the Swire Pacific name, there are several other deals for the group that are still outstanding.

Dealogic figures show that the largest of these is a five and six year HK$4.25 billion ($545 million) financing for Hong Kong Air Cargo Terminals (HACTL) that is not due until 2006/2007. Despite the complaints of bankers and the suggestions that the deal is priced too tightly the small size and the rarity value should ensure that the transaction is completed successfully.

Some bankers take a realistic view saying that the pricing and credit is not all that different from Hongkong Land's slightly longer deal. Responses are due by July 18.

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