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By Jacqueline Poh
HONG KONG May 21 COFCO Corp., China's largest
grain trader, is raising a $3.2 billion syndicated loan to back
its acquistion of Noble Group's agribusiness arm and
repay a shareholder loan, banking sources said on Wednesday.
The loan for state-owned COFCO is the biggest offshore loan
for a Chinese company this year, and comes as offshore borrowing
by Chinese firms is slowing as Hong Kong's regulators attempt to
Noble said in April that COFCO would pay $1.5 billion to buy
a 51 percent stake in Noble Group Ltd's agribusiness which will
COFCO's grain processing and distrubution business in China with
Noble's grain sourcing and trading arms in a joint venture.
$1 billion of the loan will be used for the acquisition and
the remaining $2.2 billion will repay the shareholder loan,
banking sources said.
The deal is also one of the most tightly-priced offshore
loans for a Chinese company this year.
COFCO is asking for an interest margin of 100 basis points
(bps) over Libor on the $1 billion, one-year tranche and 135bps
on the $2.2 billion, five-year tranche.
That price has only been bettered by a $2 billion, one-year
loan for Aa3-rated, state-owned oil and gas firm CNOOC, which
paid 75bps in February.
COFCO's new one-year tranche has no fee and the five-year
tranche offers fees that give all-in pricing of below 150bps.
At least eight relationship banks have been invited to join
the deal and can choose to join only the five-year tranche or
Rising funding costs are curbing banks' appetite for
finely-priced Asian loans. Taiwanese banks, which were
previously among Asia's most active lenders, are looking for
higher interest margins as a result.
Attempts by the Hong Kong Monetary Authority to clamp down
on lending to privately-owned Chinese companies are also
starting to hit volume.
Lenders are wondering whether China's state-owned companies
will be able to continue to command tight pricing in this
"Pricing is too thin and it will be difficult to get
approval," a lender looking at COFCO's deal said.
Some banks may however be swayed by the rare opportunity to
lend to a strategically important company, which is one of the
largest of China's state-owned companies.
"This is a one time only opportunity to lend to COFCO, and a
rare chance to lend a big ticket," another lender said.
COFCO has never borrowed more than $200 million from the
syndicated loan market before, in deals raised through its Hong
Moody's affirmed COFCO (Hong Kong) Ltd's A3 issuer rating
after the acquisition.
COFCO (Hong Kong) is a wholly owned offshore subsidiary of
COFCO which holds the group's key assets, including stakes in
eight listed companies.
The company's main businesses include agricultural products
trading and processing, food and packaging, and property
investment and development. COFCO reported revenues of HK$135
billion ($17.4 billion) in the 12 months to June 2013.
(Editing by Tessa Walsh)