Dec 30 Syndicated lending in Asia Pacific
(excluding Japan) scaled new heights in 2014 to $523 billion as
demand from Chinese companies continued to increase despite an
economic slowdown and regulatory constraints, helping regional
loan volumes surge 13 percent higher than the $462 billion
clocked in 2013.
Loan activity created history with volumes crossing the $500
billion mark, quite remarkably in a short period of time since
the 2008 global financial crisis. At the start of the millennium
loans transacted in Asia (ex-Japan) totalled $110 billion and
only breached the $200 billion mark in 2006.
In a repeat of the previous year, China set the bar higher
with loan volumes in 2014 reaching $141.31 billion, a 20 percent
increase over 2013. Hong Kong continued to benefit from
China-related deal flow with loan volumes hitting a record of
$92 billion as Chinese borrowers propelled borrowing activity
nearly 15 percent higher year-on-year.
Increased volumes in China, Hong Kong and Macau boosted
North Asian numbers to $276 billion, around 13 percent higher
than $244 billion in 2013. Outbound M&A loans, project and
infrastructure financing in China accounted for the bulk of the
transactions in 2014.
"China will continue to throw up acquisition financing
opportunities that will drive loan volumes up, in North Asia,"
said Aditya Agarwal, head of loans, Asia at Royal Bank of
Others agreed pointing out that M&A financing activity could
increase over the next year.
"Given the significant drop in oil prices, we expect some
M&A and related financing opportunities to arise from the oil &
gas and ancillary industries sector," said Ashish Sharma, head
of loan syndications, Asia Pacific, at Credit Suisse.
M&A activity accounted for more than 11 percent of Asia
Pacific (excluding Japan) loan volume in 2014, at $57.1 billion
via 42 deals. It marked the highest level since 2007 when M&A
loan volume reached $80.8 billion.
In 2014, the largest M&A financing was the $6.96 billion
loan backing Hong Kong-listed MMG Ltd's purchase of
the Las Bambas copper mine in Peru from Glencore Xstrata Plc
. Other acquisition financings of note were the HK$38.4
billion (US$4.95 billion) loan backing Singapore's OCBC Bank's
takeover of Hong Kong-based Wing Hang Bank, COFCO
Corp's $3.2 billion loan for its acquisition of Noble Group's
agribusiness and the HK$37 billion financing for Power
Assets Holding's spinoff of Hongkong Electric Co Ltd.
While M&A activity from China was expected to be robust, the
pace of privatisations of US-listed Chinese companies has
certainly slowed down leading to lower expectations of leveraged
buyouts from the country.
"The volume of take-privates of US listed Chinese companies
is slowing, as many have transacted in the past few years.
Future activity is always possible, as major shareholders' views
on the merits of a take-private evolve," said Clayton Carol,
head of debt capital markets, Asia (ex-Japan) at Nomura
Although China loan volumes recorded an increase over the
previous year, it is worth noting that exposure to Chinese
credits was a thorny issue for regulators in Hong Kong,
Singapore and Taiwan. Making matters worse were instances of
poor corporate governance among some borrowers that cast a pall
on privately owned entities and made lenders wary of such
With China accounting for around 27 percent of the loan
volumes from Asia (ex-Japan), it is no surprise that Chinese
lenders topped the mandated arranger league tables. Industrial
and Commercial Bank of China, which ranks among the
largest banks in the world by market capitalisation, trumped its
rivals in Asia (ex-Japan) to top the mandated arranger league
tables for 2014 with a market share of 8.8 percent.
Bank of China, which held that position in 2013,
slipped to number two in 2014, while China Development Bank,
which ranked second in 2013, slipped one notch in 2014.
Australia and New Zealand Banking Group and HSBC
took fourth and fifth spots respectively.
(Reporting By Prakash Chakravarti; editing by Sharon Klyne)