December 14, 2018 / 8:34 AM / 6 months ago

Hopewell woos with buyout deal

* Loans: Banks race to sub-underwrite HK$21bn financing

By Apple Lam and Prakash Chakravarti

HONG KONG, Dec 14 (LPC) - Hong Kong-listed developer Hopewell Holdings is set to go private, backed by a HK$25.2bn (US$3.23bn) loan that is already proving popular with lenders.

Sole mandated lead arranger, bookrunner and underwriter Citigroup launched the loan into sub-underwriting with a tight deadline of December 27 before going wider in January. Drawdown is slated for March or April.

The loan is attracting strong interest given its rarity value, the strong credit profile and the high-profile nature of the transaction for one of the venerable names from Hong Kong.

Chairman Gordon Ying Sheung Wu’s family and vice chairman Eddie Ping Chang Ho are offering to take Hopewell private in a deal valued at HK$21.256bn.

The loan is split into a HK$6.5bn cash bridge, which will not be syndicated, three and five-year term loans, and a five-year revolving credit facility.

Although the minimum ticket for banks looking to join as sub-underwriters is large at HK$5bn, a mix of Chinese and foreign banks plan to commit to the deal as Hopewell is a high-quality credit and has not tapped the loan market in more than seven years.

“Hopewell is an old-school, conservative name in Hong Kong. I’m interested in the deal because the client has a very low demand for loans. They neither develop nor buy much and are cash-rich, and would probably rarely tap even their existing bilateral lines,” said a relationship manager at a bank in Hong Kong.

In June 2011, Hopewell and peer Sino Land self-arranged a HK$5bn 3.5-year financing for a joint redevelopment project in Lee Tung Street/McGregor Street in Hong Kong’s Wan Chai area. Nine banks joined the loan, but not before the all-in pricing was lifted to 130bp from an original 110bp all-in via a margin of 95bp over Hibor.

Pricing on the latest loan is not far from that. The blended all-in pricing across the syndicated tranches is 127bp with the margins at 95bp and 120bp over Hibor for the three and five-year portions respectively.

“I think the pricing is not very high, but we will definitely try to sub-underwrite this deal because this is such a landmark transaction and the total loan amount is huge,” said another loans banker looking at the deal. “I believe a lot of banks will be clamouring to get a piece of the pie in both senior and general syndication.”

The loan-to-value ratio is less than 50%, while Hopewell’s cash balance as of June 30 was about HK$10.4bn, including HK$9.3bn from the sale of 67% of Hong Kong-listed Hopewell Highway Infrastructure to a unit of China’s state-owned Shenzhen Investment Holdings. PROPERTY POSER Still, some lenders might face hurdles in obtaining approvals due to concerns about lending to developers with projects in China.

“There is definitely no problem with the credit – it’s about the tightening of the available limit for the property sector as our bank has become more conservative about joining property deals lately,” said a senior loans banker.

Should the take-private succeed for Hopewell, it would be bucking a recent trend in Hong Kong, which is littered with failed deals.

In November Hong Kong-listed Guoco Group failed at a delisting attempt, as did Future Land Development Holdings in October last year. In February, Shui On Land’s controlling shareholder Lo Hong Sui scrapped discussions with bankers about a financing to back a potential take-private deal, while a similar deal for New World Development Store China also failed to materialise in late 2017.

Lenders have benefited from other opportunities though. In July last year, 11 banks, including sole bookrunner Bank of America Merrill Lynch, participated in a HK$28bn financing backing the buyout of Chinese shoe retailer Belle International Holdings.

That loan was split into a HK$21.5bn five-year tranche A and a HK$6.5bn three-month cash-bridge tranche B. In senior syndication, the longer-tenor tranche A offered an all-in pricing of 349bp based on an opening interest margin of 315bp over Hibor and an average life of 4.4 years. Tranche B offered an all-in pricing of 250bp. Nine of the 11 banks in the deal joined in senior syndication.

Slightly more than a year later, Belle International completed a HK$29bn five-year dividend recapitalisation and amendment and extension exercise. BAML and HSBC were the original mandated lead arrangers, bookrunners and equal underwriters of the dividend recap, which attracted 15 other banks, including eight in senior syndication. The top-level all-in in general syndication was 287.85bp based on an opening margin at 275bp over Libor and a remaining average life of 4.28 years. (Reporting By Apple Lam and Prakash Chakravarti; Editing by Luis Morais and Chris Mangham)

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