Noble Seeking Cheaper Debt as Loan Sizes Swell to Five-Year High

Companies in Asia are approaching banks with the biggest syndicated loans in five years to fund acquisitions and refinance debt as interest rates fall.

Commodities trader Noble Group Ltd. and San Miguel Corp. lead 17 borrowers in the market in Asia-Pacific outside Japan seeking as much as $11.03 billion of bank debt, according to people familiar with the plans. That’s on top of the $17.7 billion from 63 deals already signed since Dec. 31, giving an average transaction size of $359.6 million, the most since the same period of 2008, data compiled by Bloomberg show.

Borrowing costs are falling as bond-buying by global central banks to stimulate the world economy boosts the supply of cash in the financial system. Average interest margins over the London interbank offered rate for dollar loans in Asia fell 36.6 basis points to 252.7 basis points in the second half of 2012 from the first six months of the year, Bloomberg data show.

“Corporate treasurers are starting to invest for growth as loan prices get lower,” said Mikio Tanuma, the general manager of syndications in Asia at Sumitomo Mitsui Banking Corp. “Globally there’s enough liquidity and so companies are bringing bigger-sized deals to market.”

‘Jumbo’ Loans

Lenders can expect more “jumbo” deals as Asian companies expand by buying businesses both within the region and in the U.S. and Europe, where asset valuations are attractive, Singapore-based Tanuma said.

Dealmaking globally surged this year to $291.2 billion led by H.J. Heinz Co.’s $23 billion takeover by Berkshire Hathaway Inc. and 3G Capital Inc., a 20 percent jump from the same period of 2012, according to data compiled by Bloomberg show.

Citic Telecom International Holdings Ltd. is raising $1.25 billion via a two-part financing from about eight banks for its proposed 79 percent stake purchase of Companhia de Telecomunicacoes de Macau from Cable & Wireless Communications Plc and Portugal Telecom SGPS SA, Chief Financial Officer David Chan said in a Jan. 17 e-mail.

San Miguel, a century-old brewer that has diversified into the oil, airline, electricity and gas industries to become the Philippines’ largest company by sales, is seeking a loan of as much as $1.5 billion to help refinance debt, a person familiar with the matter said earlier this month. A facility that size would be the company’s largest since 2009, Bloomberg data show.

San Miguel

“We’re seeing a stronger pipeline so far this year, with a number of sizeable refinancings,” said Oscar Tang, the head of loan syndications at Shanghai Pudong Development Bank’s Hong Kong unit. “New money deals” will only help that trend, he said.

Noble, Asia’s biggest publicly listed commodity trader, has approached lenders for a $2 billion two-part loan and plans to offer all-in rates of as much as 40 basis points lower than what it paid for its $2.36 billion borrowing which closed in 2012, a person familiar with the matter said Feb. 8.

Cargill Inc. hired seven banks for a $1 billion, 364-day revolving credit facility to refinance a $1.25 billion loan signed in March last year, according to a Feb. 7 e-mailed statement from Bank of Tokyo-Mitsubishi UFJ Ltd., one of the arranging lenders.

Hibor Margins

Sun Hung Kai Properties Ltd. meanwhile is inviting its relationship banks to participate in a HK$5 billion ($645 million) five-year syndicated loan to partly refinance its HK$15.25 billion facility which matures this year, three people familiar with the matter said Jan. 8. The developer, which also operates hotels and manages carparks, is offering an interest margin of about 138 basis points over the Hong Kong interbank offered rate, the people said.

Hong Kong-dollar denominated loans signed in the second half of 2012 paid an average margin of 278.6 basis points over Hibor, according to data compiled by Bloomberg. With Hibor at 0.385 percent, the rate Sun Hung Kai is offering to pay is still 228 basis points less than the 4.04 percent weighted averaged fixed coupon the company is paying on its bonds.

Although conditions are “very favorable” in the loans market, bonds do continue to detract from total volumes, said Phil Lipton, the Asia-Pacific head of syndicated finance at HSBC Holdings Plc.

Yields Increase

Bond sales in Asia-Pacific excluding Japan surged last year to a record $208.9 billion as yields tumbled to all-time lows, while syndicated loan volumes fell 18 percent to $377.8 billion from 2011, according to data compiled by Bloomberg. Loans signed last month total $15.7 billion, a 28 percent increase on the $12.3 billion of facilities completed in January 2012, the data show.

The spread investors demand to own dollar bonds in Asia over government debt has increased six basis points this year to 266.6 basis points Feb. 15, HSBC indexes show. Yields, which touched 3.352 percent on Oct. 16, the least in data going back to 1996, were 3.654 percent Feb. 15, the data show.

“Asia’s syndication loan market had a relatively stable year in 2012,” SMBC’s Tanuma said. “This year’s outlook may be a bit better given there are bigger size deals.”