March 1, 2019 / 9:28 AM / 4 months ago

Slow progress on Asian loans

* Loans: Indian, South-East Asian credits lumber through syndication

By Chien Mi Wong and Prakash Chakravarti

HONG KONG, March 1 (LPC) - Syndicated loans for some Asian borrowers, particularly from India and South-East Asia, are taking longer than usual to close, with some financings lumbering in the market for over six months.

While a variety of credit or sector-specific reasons are behind the current delays, the rising tension between India and Pakistan and elections in countries such as India and Indonesia are expected to create additional hurdles in coming months.

“The slow-going syndication for some financings is due to a combination of factors – market-related issues such as elevated funding costs in late 2018, and credit-specific matters such as acquisition situations and financial performance,” said a senior loan syndications banker in Hong Kong.

Loans for Indian borrowers top the list of transactions that have crawled in syndication, given the headwinds in certain parts of the economy, including the woes of non-banking financial sector following some company defaults.

Loans for Jaguar Land Rover, the UK-based luxury car unit of India’s Tata Motors, and London-listed Indian mining company Vedanta Resources, which is still fighting to reopen one of its copper smelters after deadly protests last May, have been in the market for several months.

JLR’s US$1bn loan via nine mandated lead arrangers and bookrunners hit the market in late October, close on the heels of Vedanta’s US$1.1bn buyout financing via MLABs Credit Suisse and Standard Chartered.

JLR booked its biggest quarterly loss of £3.4bn (US$4.51bn) on the back of a £3.1bn write-down in the last three months of 2018 and also suffered a Moody’s downgrade from Ba3 from Ba2 in November.

“The company needs swift action to secure its future,” said a Singapore-based syndicated loans banker, adding that market participants found the pricing tight given the developments.

The loan pays a top-level all-in pricing of 183.1bp based on an interest margin of 170bp over Libor and an average life of 5.74 years.

Meanwhile, Vedanta’s loan has received commitments from lenders, but has taken longer to close because shares that form the security for the financing have suffered a fall, leading to a drop in the collateral value.

Last year, another bellwether Indian credit, Larsen & Toubro, struggled to attract lenders to a US$136.5m refinancing for its Middle Eastern unit. The loan launched in June and closed a few months later.

Among the reasons for the poor response was a reorganisation of the borrower midway through syndication and what many considered tight pricing. The loan, led by First Abu Dhabi Bank and StanChart, paid a top-level all-in pricing of 84.03bp based on a margin of 65bp over Libor and a remaining life of 2.68 years.

Mumbai-listed Shriram Transport Finance also struggled to attract lenders to a US$350m five-year loan launched in August last year via five MLABs. The borrower was forced to sweeten pricing by 55bp and relaunch the deal last month after a string of defaults at Infrastructure Leasing & Financial Services in September raised fears about non-bank lenders.

GEOPOLITICAL HEADWINDS

Given the rising tensions between India and Pakistan over the past couple of weeks, it remains to be seen how lenders process Indian credits. Shriram Transport Finance is now offering a top-level all-in pricing of 225bp based on an interest margin of 195bp over Libor.

“Indian loans face more headwinds this year with the ongoing stand-off between India and Pakistan and the national elections expected to be held in the coming months,” said the Hong Kong-based banker.

South-East Asia, too, has its share of slow-moving loans. In Indonesia, coal-related infrastructure and logistics company Titan Infra Energy’s US$450m five-year loan is still in syndication after its launch in early October as lenders remain concerned over the sector’s outlook.

“It’s not a straightforward deal given the sector,” said a Singapore-based loans banker. “The slowing global economy combined with oversupply in China and international markets could impact coal demand, which is not great.”

Bank Mandiri, Bank CIMB Niaga and Credit Suisse are the MLABs on the borrowing, which pays a juicy top-level all-in of 602.47bp based on an interest margin of 575bp over Libor and an average life of 3.64 years.

Last year, an extension exercise for a US$170m three-year loan signed in 2016 for Indonesia pay-TV operator MNC Sky Vision failed to score with lenders. The deal, which also launched last October, did not appeal to existing lenders as news emerged in mid-December of French company Vivendi eyeing a stake in MNC Vision Networks, the parent company of MSky. The loan matures in November and amortisation payments are on track.

Ownership changes have also stalled a US$205m four-year financing for Singapore-based disk-drive parts maker MMI Holdings, which is also seeking a waiver on existing debt after private equity giant KKR agreed to sell it to a Chinese consortium.

The deal was launched in August last year and has attracted lenders, but closing is on hold because of developments relating to some of the members of the consortium, which includes Beijing HBH Innovation Industry Fund Management, Cybernaut Investment Group and MMI management, as well as minority investors.

Reporting by Chien Mi Wong and Prakash Chakravarti; Editing by Vincent Baby

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