Hong Kong Exchanges Said to Seek Loan for Potential LME Purchase

Hong Kong Exchanges & Clearing Ltd. is seeking an acquisition loan to back a possible bid for the London Metal Exchange, according to two people familiar with the matter.

The loan may be as much as $3 billion, the people said, asking not to be identified because the details are private.

Hong Kong Exchanges spokesman Scott Sapp declined to comment on the potential financing package when contacted by telephone at his office in Hong Kong today. The company owns and operates the city’s stock exchange, futures exchange and their related clearinghouses.

The London Metal Exchange, the world’s biggest metals trading platform, said on March 29 it is in the process of answering questions from bidders, which must submit offers for the 135-year-old bourse by May 7. The LME got preliminary bids from CME Group Inc., NYSE Euronext and IntercontinentalExchange Inc., three people with direct knowledge of the matter said in February. Hong Kong Exchanges also bid, the South China Morning Post reported at the time, citing two people it didn’t identify.

The LME handles more than 80 percent of global trade in metals futures and reported record volume of $15.4 trillion last year. It’s being advised by Moelis & Co. on the sale process. LME may be valued at about $1.3 billion, according to Equity Research Desk, a hedge-fund adviser in Greenwich, Connecticut.

The talks with potential lenders were reported by Reuters earlier today.

Hong Kong Exchanges has been expanding its products and forming international alliances as it enters the final year of its three-year strategic plan and seeks to become a comprehensive financial center for China.

An “urgent action” is required to build its businesses in financial derivatives and commodities to meet its goal of being a comprehensive financial center for China, the bourse said in its earnings statement on Feb. 29, when it reported a 1 percent increase in its full-year net income.

“If it is the ultimate goal for Hong Kong Exchanges to diversify its revenue sources, I’m sure they are trying their best to bid for LME,” Kenneth Yue, an analyst at CCB International Securities Ltd., said by telephone from Hong Kong today. “Looking into metal exchanges will enhance its revenues.”

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