- Chinese chemical company seeks record loan to support takeover
- Growing debts at Chinese businesses have spurred concerns
China National Chemical Corp. announced plans for a $20 billion syndicated loan to help fund the purchase of Syngenta AG, setting a potential financing record for a Chinese acquisition.
The facility will be split between a $15 billion bridge loan and $5 billion to support seedmaker Syngenta’s existing borrowings, according to a statement. The funds will eventually be replaced with debt and equity in way that lets Basel, Switzerland-based Syngenta retain an investment-grade credit rating, it said.
ChemChina agreed to buy Syngenta for $43 billion earlier this month in deal that will transform it into the world’s largest supplier of pesticides and agrochemicals. The planned loan dwarves Chinese companies’ previous overseas mergers and acquisitions financing, and it may stoke concerns about the nation’s businesses piling up debt in a push to buy foreign technology.
“There is growing concern about the overall indebtedness of China and in particular corporate China,” said Bert Ely, an independent banking consultant, based in Alexandria, Virginia. “With the implicit backing of the Chinese government, there is a belief that such companies are a better credit risk, although that is being tested more and more.”
The planned deal would be the largest syndicated loan worldwide this year, surpassing the $18 billion raised by Shire Plc last month, according to data compiled by Bloomberg. Volkswagen AG signed a 20 billion-euro ($22 billion) syndicated revolving facility in December.
ChemChina also this month sought a 625 million-euro loan to help fund the purchase of German machinery maker KraussMaffei Group. The Beijing-based company raised a 6.8 billion-euro loan last year for the acquisition of Italian tiremaker Pirelli & C. SpA.
HSBC Holdings Plc will act as global coordinator for the Syngenta loan, according to the statement. China Citic Bank Corp., Credit Suisse Group AG, Rabobank and UniCredit SpA will also work on the deal.
Banks will be asked for commitments of $1.25 billion toward the loan. A lenders’ presentation will take place next and the deal is expected to close by early April, according to the statement.
ChemChina has received “so many” offers of funding for the Syngenta deal, including from private equity investors and banks, Chairman Ren Jianxin said Feb. 3.
China Reform Holdings Corp., an investment firm charged with revamping the nation’s state-owned enterprises, is in advanced talks to join the acquisition, according to people familiar with the situation. Other Chinese state-backed entities, as well as sovereign funds from Asia and other parts of the world, have also expressed interest, one person said.