Malaysia Loans Defy Asia Slump as Companies Invest for Growth

Malaysian companies boosted borrowing by almost 40 percent this year, defying a loans slump in the rest of Asia to support a $444 billion economic development program and expand through acquisitions.

Syndicated loans in Malaysia total $13.1 billion since Dec. 31 compared with $9.5 billion in the same period of 2011, the most on record for this part of the year in Bloomberg-compiled data. That’s bucking the trend in the rest of Asia, where lending has dropped 31 percent, the data show. DanaInfra Nasional Bhd. and Malaysia Development Bhd., the biggest borrowers, sought to finance a mass rapid transit system and buy power generation assets.

Malaysian Prime Minister Najib Razak, whose National Front coalition is seeking to retain its hold on power before elections due by early 2013, is spending on infrastructure to spur economic growth of as much as 5.5 percent in 2013, according to Finance Ministry forecasts. Mergers and acquisitions rose 10 percent to $25 billion in 2012, also adding to corporate funding needs, Bloomberg-compiled data show.

“A larger driver of the loan market this year has been companies raising money for acquisitions and capital expenditure requirements,” David Lim, the co-head of debt markets at CIMB Bank Bhd., said by phone before the Asia-Pacific Loan Market Association’s Malaysian Loan Market Conference in Kuala Lumpur today. “There’s still a few large outstanding loans which are expected to be completed by the end of the year.”

M&A Activity

Johor Corp. and CVC Capital Partners Ltd. in December bid at least $1.6 billion for KFC Holdings (Malaysia) Bhd. and parent QSR Brands Bhd., which operate more than 900 fast-food outlets in the region including Kentucky Fried Chicken and Pizza Hut stores. CIMB is arranging the finance package and agreed to underwrite the facility, people familiar with the matter said at the time.

Petron Oil & Gas International Bhd. borrowed a 720 million ringgit ($236 million) bridge facility signed March to help pay for oil assets in the nation, according to data compiled by Bloomberg. San Miguel Corp., through Petron Corp., agreed to acquire Exxon Mobil Corp.’s 65 percent stake in Esso Malaysia Bhd. in August 2011 for about $610 million, its first acquisition of overseas oil assets.

Companies have also sought funding for energy projects in Sarawak and Sabah, coastal states home to oil and gas reserves, agriculture and marine resources, said Seohan Soo, the head of debt capital markets at AmInvestment Bank Bhd.

“Malaysia is rich in hydro-power and clean energy, which are valuable resources to heavy manufacturers in China and Japan,” said Kuala Lumpur-based Soo. “The government is harnessing the country’s vast natural resources to develop energy efficient industry and we’re starting to see demand for loans flow from that.”

IPO Borrowing

Press Metal Bhd., the Malaysian maker of aluminum products which has a joint venture with Sumitomo Corp. to construct a smelter in Sarawak, borrowed 350 million ringgit in May to help finance the second phase of the development, according to data compiled by Bloomberg.

Borrowers in Malaysia this year include companies planning stock sales, the data show. Kuala Lumpur has been home to three of emerging Asia’s four biggest initial share sales in 2012 and the benchmark stock index closed at a record this month.

Malaysian policy makers said in May they would form a task force to boost the efficiency of capital markets to make the nation more competitive.

“Higher loan volumes are attributed largely to pre-IPO financing for a number of recent transactions,” said Boey Yin Chong, the Singapore-based managing director of syndicated finance at DBS Bank Ltd.

Healthcare, Property

IHH Healthcare Bhd., which sold 6.3 billion ringgit of stock in July, arranged loans in the Malaysian currency and in Singapore dollars in May, Bloomberg data show. IGB Real Estate Investment Trust signed a 1.2 billion ringgit five-year loan in August, before its IPO the next month, the data show.

Malaysia’s jump in loan volumes comes as bank lending in the Asia-Pacific region outside of Japan tumbled 31 percent from the same period last year to $252.1 billion, the lowest for the comparable period since 2009, Bloomberg data show. Firms face rising borrowing costs and have opted for more private, so-called bilateral facilities and bonds.

Volumes are down 23 percent to $25.3 billion in Singapore, 15 percent to $10.8 billion in Indonesia and 29 percent to $23.1 billion in Hong Kong, the data show.

“It’s been a fairly good year for the Malaysian loan markets,” CIMB’s Lim said. “It’s a little too early to call but I’d say loan volumes next year in Malaysia will probably be flat.”

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