September 8, 2011 / 4:46 AM / 8 years ago

BASIS POINT-China Development Bank seeks $400 mln onshore loan

(The following item was previously published by Basis Point, a Thomson Reuters publication)

* Tight pricing discourages lenders to join

* May downsize due to lack of appetite from lenders

By Kane Wu

HONG KONG, Sept 8 (Reuters Basis Point) - China Development Bank is seeking a US$400m three-year term loan for working capital, banking sources told Thomson Reuters Basis Point.

Bank of Tokyo-Mitsubishi UFJ is the mandated lead arranger and the MLA has invited eight to 10 banks to join the syndicated loan.

The facility is offering a margin of 180bp over Libor and a 15bp participation fee, sources said.

The 180bp margin, however, is not enough to meet many invited lenders’ costs especially for an onshore facility, according to sources.

“It is not market price, especially when every bank has a tight credit limit these days,” said an invited banker who will not join the deal because of the tight pricing.

Another source added, “We have been approached but the margin is too low for us to join.”

Sources familiar with the deal said the loan could be downsized due to lack of market appetite.

Recent onshore foreign currency deals were priced in the 400s. Guangxi Liuzhou Iron & Steel (Group) Co, for example, is offering 420bp over Libor on its US$94m three-year loan currently in the market, and Shanghai Zijiang Enterprise Group Co Ltd is offering high 400s on its US$100m three-year loan.

Companies which ventured offshore get lower pricing compared to raising funds onshore.

State-owned Chinatex Corp is seeking an up to US$500m debut offshore loan in Hong Kong, which is offering a margin of at least 250bp over Libor. And top Chinese aluminium maker Aluminum Corp of China Ltd (Chalco) is raising a US$300m three-year syndicated loan in Hong Kong priced at a margin of 120bp over Libor.

According to the bank’s website, CDB’s assets were over Rmb5tr in 2010 and its non-performing loan ratio was at 0.8%.

CDB’s yearly net profit is at Rmb35.3bn and its total outstanding domestic and foreign currency loans in 2010 was Rmb4510bn. CDB is rated Aa3 by Moody’s, AA- by S&P and A+ by Fitch and R&I. (Editing by Chris Lewis)

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