* Loans: International banks dominant in 2019’s first Chinese acquisition loan
By Apple Lam, Prakash Chakravarti and Evelynn Lin
Hong Kong, Jan 11 (LPC) - Anta Sports Products has launched syndication of a five-year multi-billion loan with a foreign bank-dominated arranger group, demonstrating that sentiment among international lenders remains strong for Chinese privately owned enterprises despite the overhang of the trade war between the US and China.
Bank of China is the only Chinese name in the seven-strong arranger group for the €2.2bn (US$2.51bn) recourse loan that will fund an Anta-led consortium’s proposed acquisition of Finland’s Amer Sports for €4.6bn. International banks are also expected to play a dominant role in another €2.015bn non-recourse borrowing at the target level.
BOC won the joint global coordinator role along with Citigroup and JP Morgan on the €2.2bn loan mainly because it has a close relationship with both the acquirer and the target, whereas other large Chinese banks only have relationships with Anta inside China.
“Most cross-border M&A deals for Chinese buyers would involve international banks as advisers and lenders. International banks also have existing relationships with the target company in Europe making it easier for them to consider non-recourse financings as well,” said a senior loans banker at an international bank in Hong Kong.
SCARCE OPPORTUNITIES It is not the first instance of a holdco-level loan in Asia combined with a target-level financing for a Chinese acquirer. But such borrowings have been rare in the past couple of years and syndications even rarer.
The previous widely syndicated acquisition loan with recourse and non-recourse portions for a Chinese company was around two years ago when state-owned China National Chemical Corp (ChemChina) closed a US$12.7bn recourse bridge loan in Asia and a US$20.2bn non-recourse bridge loan at the target level in Europe to finance its SFr43bn (US$44.2bn) acquisition of Swiss chemical and seeds manufacturer Syngenta.
However, M&A financings from China have been on a gradual decline after Chinese regulators imposed capital controls in late 2016. The onset of the trade war between the US and China around April last year exacerbated the slowdown in deal flow.
Chinese lenders snapped up whatever limited opportunities arose from outbound China M&A. In 2018, they were dominant in five loans totalling US$6.92bn in outbound China M&A situations, compared with US$10.63bn from seven loans in 2017, according to LPC data.
For instance, in December, privately owned Zijin Mining Group raised a US$840m loan backing its buyout of Canadian copper and gold miner Nevsun Resources. China Construction Bank was the sole lead, while nine of the 10 banks joining were Chinese.
In October China Citic International arranged a US$3.5bn loan for Tianqi Lithium for its purchase of 24% of Chilean lithium producer Sociedad Quimica y Minera. Two of the four banks joining were Chinese.
And in May, global coordinators BNP Paribas and China Citic Bank closed a limited syndication of a €3.07bn loan to support Zhejiang Geely Holding Group’s purchase of 8.2% of AB Volvo. Eight out of the 14 banks joining were Chinese lenders contributing €1.07bn in total.
PROMISING OUTCOME It remains to be seen if Anta’s recourse loan also attracts Chinese banks in hordes. Anta is guarantor on the loan, which carries rarity value and represents exposure to a strong credit. Anta is a top POE in the sporting goods industry, owning local rights to brands such as FILA and NBA, and has little debt with a low leverage ratio of 2.75x–3.0x. Amer Sports’ brands include Salomon, Atomic and Wilson.
According to some, the top-level all-in pricing of 216bp, based on an opening interest margin of 200bp over Euribor and a blended average life of 4.795 years, is somewhat reflective of those factors.
“This deal is a leveraged financing for a POE credit priced as a corporate financing for an SOE,” said a Hong Kong-based banker looking to join the deal.
The presence of other top-tier sponsors in the buying consortium should also add to the appeal. Chinese private equity firm FountainVest Partners, tech sector behemoth Tencent Holdings and Chip Wilson, the billionaire founder of yoga-apparel retailer Lululemon Athletica, are partnering Anta in the acquisition.
“Anta’s deal is a good example of Chinese and foreign lenders collaborating to support an outbound M&A transaction, which would combine Chinese banks’ deep understanding of the PRC acquirers with international lenders’ experience in arranging cross-border M&A financings,” said a Beijing-based loans banker at a Chinese bank.
Others also pointed out that the willingness of international banks to arrange and participate in Anta’s financing is a sign that strong Chinese POEs are still welcome to borrow in the overseas debt markets even though the trade war has raised hurdles for many companies in China and soured sentiment among foreign lenders. (Reporting By Apple Lam, Prakash Chakravarti and Evelynn Lin; editing by Chris Mangham)