HONG KONG/SINGAPORE Three banks are providing a fully underwritten $4.95 billion bridge loan to Singapore's Overseas-Chinese Banking Corp Ltd (OCBC) to fund its offer to buy Hong Kong-based Wing Hang Bank, according to sources close to the matter.
Bank of America Merrill Lynch (BofA), HSBC and J.P. Morgan are sharing equal underwriting of the loan, the sources said, which will have a 12-month tenor.
The size of the loan, which is the same as OCBC's (OCBC.SI) all-cash offer for Wing Hang 0302.HK, shows how hungry lenders in the region have become to book assets and finance large acquisitions.
BofA (BAC.N), HSBC (0005.HK), and J.P. Morgan (JPM.N) declined to comment. OCBC did not return a call seeking comment.
OCBC said on Tuesday that it has agreed to buy Wing Hang for HK$125 per share, or $4.95 billion, in a deal that would give the Singapore lender a much sought-after gateway to the Greater China region.
The sources said the bridge will be taken out by capital markets fundraisings to be determined later this month. OCBC said on Tuesday that it planned to raise equity but did not give more details.
OCBC's bridge loan will be the second such banking acquisition-related loan in Hong Kong in recent months.
Last October, four banks provided a $1 billion bridge loan to Yue Xiu Enterprises Holdings Ltd for its HK$11.64 billion ($1.50 billion) purchase of a 75 percent stake in Hong Kong lender Chong Hing Bank Ltd.
Record low interest rates across the globe have fuelled cheap loans and huge borrowing levels in Asia. Following the region's quick recovery from the 2008 financial crisis, banks have thrown themselves at the feet of companies with strong credit ratings and the desire to purchase assets at home and abroad.
While that has helped Asian companies expand their businesses, leverage levels across the region have risen sharply, sparking concerns that a sharp economic slowdown would spark the kind of debt distress China is showing signs of.
The $8 billion loan for Chinese e-commerce giant Alibaba Group completed last July is an example of the appetite among lenders. Nine banks underwrote the loan initially, while nine other lenders joined the deal subsequently.
(Reporting by Prakash Chakravarti of IFR/LPC and Saeed Azhar; Editing by Michael Flaherty and Ryan Woo)