December 2, 2011 / 5:21 AM / 6 years ago

'Axe sheets' grow as Credit Agricole, others dump Asia loans

* Credit Agricole lists 64 Asia loans worth $1.1 bln

* HSBC also circulating loans on offer

* Activity is tightening credit for Asian businesses

* Europe has shrinking share of Asia syndicated loan mkt

By Michael Flaherty and Stephen Aldred

HONG KONG, Dec 2 (Reuters) - Under pressure from a spiralling debt crisis at home, Credit Agricole and other European banks are offloading more of the loans they hold in Asia, squeezing up lending rates and making it tougher for small and mid-sized companies to borrow.

As French and other European-based banks look to sell overseas assets to shore up their capital at home, they have increased the traffic in detailed loan documents, known as axe sheets, to other banks across Asia.

These sheets specify loans that a bank has previously handed to a company and now wants to sell on to another bank or trade in the secondary market.

Credit Agricole has listed 64 Asia loans worth $1.1 billion, according to the French bank’s most recent axe sheet, obtained by Reuters. The loans currently support such companies as India’s Bharti Airtel and Hong Kong’s Sun Hung Kai Properties.

Two years ago, the bank was offering just 8 loans worth $170 million in Asia, an axe sheet from that period shows.

“What you’re seeing is evidence of what one’s hearing: that the European banks are deleveraging and selling assets,” said Philip Cracknell, Global Head of Syndications for Standard Chartered Bank.

While axe sheets are common, it is unusual to have so many Asia loans on sale at one time and to see how widely these sheets are being distributed, with banks offering up deals to rivals they would normally want to keep out of the process.

HSBC, Europe’s biggest bank, is offering 17 corporate loans worth $370 million, extended to companies including Reliance Industries and Huawei International, according to another axe sheet obtained by Reuters.

These are a combination of HSBC loans and loans from other institutions, and not all are for selling but instead to trade in the secondary market, said a source familiar with the matter, who could not be named as he was not authorised to speak publicly about it.

HSBC and Credit Agricole declined comment for this article.


The Asia loan selldown shows just how difficult it may be for Asian businesses to open new lines of credit now that a prominent group of lenders are pulling back.

European banks’ portion of syndicated loans in Asia ex-Japan fell to 16 percent in the first half of this year. Three years ago, that share was closer to 30 percent, Thomson Reuters LPC data shows.

Secondary loan market players won’t always step in for a primary loan, nor is it a guarantee that Asia-based banks will be as generous to lend when a company comes asking to borrow.

The loans on offer in Asia are being sold at discounted prices by sellers who just want to get out. That’s driving up prices of primary market loans, as bankers who play in both markets know they can get cheaper secondary loans.

Loan bankers expect steeper discounts to come given that buyers are waiting for even better bargains. That in turn will push up prices in the primary market.

“What’s happened since August is a very aggressive deleveraging in these regions,” said Philip Suttle, chief economist at the Institute of International Finance, referring to emerging markets such as Eastern Europe and Asia.

While loans bankers say Asian and Australian banks have stepped into the gap left by the Europeans, the loss of liquidity will still hit Asia’s corporate borrowers.

In the meantime, the axe sheets keep coming throughout the Asia loans market, landing in the laps of secondary traders used to selling loans held by their institutions, not those of others.

“The fact that I‘m seeing axe sheets from other banks should tell you something,” said one Asia loans banker, who is an active trader in the secondary loans market.

“I‘m now a broker for another bank’s deal.”

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