March 13, 2020 / 9:00 AM / 23 days ago

Thailand’s largest loan takes shape

* Loans: Three underwrite CP Group’s US$10.6bn Tesco Asia buy

By Prakash Chakravarti and Chien Mi Wong

MUMBAI/HONG KONG, March 13 (LPC) - Three banks are providing a bridge loan of around US$7.5bn to Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group after it emerged victorious in the battle for Tesco’s Asian business with a US$10.6bn bid.

JP Morgan, Siam Commercial Bank and UBS are underwriting the loan, which has a tenor of between 12 and 18 months and will be launched to a select group of banks in senior syndication this week.

Early indications point to strong interest from other lenders, including a large group of banks that provided a US$10–$11bn bridge loan backing an unsuccessful bid by beer magnate Charoen Sirivadhanabhakdi’s TCC Group.

That is despite the rich valuation of around 12.5 times core earnings for the target business, putting the bridge loan at around 8.84x earnings.

“It is a shame our horse lost out in the race. However, it is not the end of the world. We will be keen to lend to the winning bidder as we have already done quite a bit of groundwork and would not want that to go waste,” said one senior banker working on a rival bid.

Dhanin’s CP Group trumped rival bids from the Chirathivat family’s Central Group – Thailand’s biggest retailer by market capitalisation – and Charoen’s retail unit Berli Jucker.

The bridge loan for Dhanin’s CP Group will set a record in Thailand, trumping Berli Jucker’s US$6.2bn-equivalent financing for its purchase of Big C hypermarkets in March 2016.

“It will be good to get involved in CP Group’s loan as we don’t get such jumbo deals often in Thailand,” said a banker away from the deal.

FAMILIAR NAME

Lenders are also keen to take part given CP Group’s profile and track record. Dhanin’s flagship operates 12,000 7-Eleven convenience stores through CP All and about 80 cash-and-carry stores through Siam Makro.

CP Group will gain control of 1,965 stores that Tesco operates in Thailand – many of which it sold to the British firm during the 1997-98 Asian financial crisis – including 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores, plus 74 outlets in Malaysia.

Over the years, big-ticket acquisitions by Dhanin have provided a few multi-billion dollar financing opportunities for Asian lenders. CP All’s purchase of wholesaler Siam Makro in June 2013 came with a US$5.88bn 12-month bridge loan, which was subsequently refinanced through a term loan of slightly over US$4bn in January 2014. Earlier in 2013, UBS provided a US$5.5bn five-year loan that replaced a bridge backing CP Group’s acquisition of HSBC’s 15.6% stake in Ping An Insurance Group Co of China.

Reporting By Prakash Chakravarti and Chien Mi Wong; Editing by Steve Garton

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