General syndication launched earlier this week for the $25 million three-year term loan for LHMW Investment Corporation is proceeding well with the facility likely to be over-subscribed. BNP Paribas is the sole mandated arranger for the transaction.
The loan offers a margin of 70bp over Libor with all-in of 78bp for commitments of $5 million and 75bp for $3 million. The loan will be repaid in four equal instalments following an 18-month grace period. The average life of the loan is 2.25 years.
The borrower is incorporated in the British Virgin Islands (BVI) and wholly-owned by Taiwan-incorporated Lioho Machine Works Ltd. (LHMW). LHMW is the guarantor for the borrowing, which marks the borrower's debut in the foreign-currency loan markets. Proceeds from the loan will be utilised for the group's operations in Mainland China.
In terms of security for the deal the guarantor will provide an unconditional and irrevocable guarantee in form and substance satisfactory to the banks, pledge its shares in the borrower and subordinate all its loans to the borrower. The deal also has an ownership covenant whereby LHMW shall maintain a direct or indirect shareholding of at least 80% in the borrower at all times. Financial covenants for the loan that apply to the guarantor are as follows:
- Minimum consolidated tangible net worth of NTD3 billion;
- Maximum ratio of consolidated total liabilities (excluding minority interest) to consolidated tangible net worth of 1.4 times;
- Minimum interest coverage ratio (defined as earnings before interest, taxes, depreciation and amortization divided by interest expenses) of 4.0 times;
- Minimum current ratio of 0.8 times.
LHMW is primarily engaged in the manufacture and sale of automotive parts, aluminium alloy wheels, casting parts and stamping parts. LHMW counts major auto-makers and electronics companies among its clients such as Toyota, Ford, General Motors, Sony, Philips and National Panasonic. The Universal Cements Group and the Tsung family hold 48% stake each in LHMW.
