(Repeats story first published late Monday; no change to text)
By Sharon Klyne
SYDNEY Dec 30 (Reuters Basis Point) - A surge of loans in
the fourth quarter helped push Australia's total for the year to
$100 billion, up 25 percent from 2012, according to Thomson
Reuters Loan Pricing Corp.
Bankers said a number of companies rushed deals in November
and December to take advantage of strong bank liquidity and
cheap pricing, mindful of the risk that Basel III capital
controls could push up the cost of debt in 2014.
Power company Energy Australia, property firm Lend Lease
Corp Ltd and search firm Seek Ltd were among
borrowers seeking to reprice their loans before the year end.
Seek was looking for a A$557 million ($495.26 million) loan
to refinance an existing A$450 million deal raised a little over
a year earlier. But by far the largest loan of 2013 was Origin
Energy Ltd's A$6.6 billion ($5.87 billion) refinancing
closed in November. The deal refinanced all of the company's
existing loans, including bilaterals, into one core facility.
Loan margins fell steadily during the year in tandem with
banks' funding costs.
Lenders believe margins have slid far enough and are
unlikely to drop much more unless funding costs also come down
further. Even so, slow deal flow in early 2014 could start
another round of margin cuts, lenders say, as demand out paces
At current levels, banks say the margin on a three-year loan
for a BBB rated company is around 135-140 basis points, while a
five-year loan is being quoted at around 165-175 basis points.
Upfront fees have steadied for investment-grade borrowers to
10 basis points per year, while sub-investment-grade companies
pay at least 15 basis points per year in fees. There is also
pressure for commitment fees to drop to 40-45 percent of the
margin, down from the current 50 percent level.
BETTER M&A PROSPECTS
Merger and acquisition activity was quiet for most of 2013,
except for deals such as private equity giant TPG's acquisition
of poultry producer Inghams Enterprises Pty Ltd, the year's
largest leveraged buyout.
Instead, private equity firms spent 2013 busily refinancing
and recapitalising investments to pay dividends to shareholders
including Pacific Equity Partners' Hoyts Group and Link Group.
The U.S. institutional market continued to provide liquidity
and more aggressive structures to leveraged companies such as
Alinta Energy Ltd, Spotless Group Ltd and Hoyts.
Iron ore miner Fortescue Metals Group Ltd took
advantage of a window to reprice its $4.95 billon term loan B in
November, barely a year after it completed the initial deal. The
margin was slashed by 100 basis point to 325 basis point over
Libor, saving the miner $50 million a year in interest costs.
M&A bankers are hopeful of a turnaround in 2014 as
confidence in the economy improves, spurred by offshore deals
already announced by glove manufacturer Ansell Ltd and
Seven Group Holdings Ltd.
A fierce three-way fight for dairy company Warrnambool
Cheese & Butter Factory Co Holdings Ltd should also be
resolved in 2014. The project finance market has enjoyed steady
dealflow, including large refinancings for the AquaSure
desalination project and the Sydney desalination plant.
Maintaining the momentum in 2014 will be the closing of a
number of public-private partnerships in the bid phase,
including the North West Rail Link and Perth Stadium.
In the resources sector, the $7 billon project financing for
Roy Hill Holdings Pty Ltd's proposed 55 million tonnes per year
iron ore mine is slated to close in the first quarter of 2014.
The pipeline in New Zealand is brightening with the upcoming
sale of Transpacific Industries Group Ltd's waste unit, as well
as the closing of the NZ$1 billion-plus ($818.60 million)
Transmission Gully road project.
The New Zealand market was generally flat in 2013, dominated
by refinancings arranged on a best effort or club loan basis for
companies such as Chorus Ltd.
A rare exception was a NZ$165 million ($135.07 million)
underwriting by Bank of New Zealand for mobile operator Two
Degrees Mobile Ltd. Total volume for the year was $12.3 billion,
compared to the $11.5 billion completed in 2012.
($1 = 1.1247 Australian dollars)
($1 = 1.2216 New Zealand dollars)
(Reporting by Sharon Klyne)