Power Assets Approaches Banks for HK$37.5 Billion Spinoff Loan

Power Assets Holdings Ltd., controlled by Asia’s richest man, Li Ka-shing, has approached its relationship banks for a HK$37.5 billion ($4.8 billion) three-year term loan to back the spinoff of its Hong Kong electricity arm, three people familiar with the matter said.

Loan proceeds will be used to fund the acquisition of the entire stake of the company’s Hongkong Electric Co. by the spinoff unit, HK Electric Investments Ltd., the people said, asking not to be identified because the details are private. Price talk for the facility is at an all-in rate, which includes interest and fees, of about 110 basis points over the Hong Kong interbank offered rate for minimum pledges of HK$3 billion, the people said.

Power Assets is seeking to raise as much as $5 billion by selling units in its Hong Kong electricity arm, two other people with knowledge of that plan said last month. The company plans to sell as much as a 70 percent stake in the division through a business trust structure, Power Assets said in a Sept. 27 Hong Kong stock exchange statement. A $5 billion sale would be the biggest initial public offering in the city since October 2010, when AIA Group Ltd. raised $20.4 billion, according to data compiled by Bloomberg.

A Hong Kong-based spokeswoman for Power Assets declined to comment on the loan financing when contacted by phone yesterday.

Offshore Interests

Hongkong Electric, which started operations in 1890, provides electricity to about 568,000 customers. The company, one of two major power suppliers in the city, reported a profit of HK$4.5 billion in 2012 and had a net asset value of HK$5.6 billion as of Dec. 31, according to its Sept. 27 statement unveiling the spinoff plans.

Outside of Hong Kong, Power Assets has interests in businesses from gas distribution to wind farms in the U.K., Australia, China, New Zealand, Thailand, Canada and the Netherlands. Earnings from the company’s power assets outside Hong Kong increased to about HK$5.1 billion last year, from HK$700 million in 2007, according to the Sept. 27 statement.

A HK$37.5 billion loan would be the second-biggest syndicated financing in Hong Kong this year after Cnooc Ltd.’s $6 billion facility in February, according to data compiled by Bloomberg. That was used to back Cnooc’s acquisition of Canada’s Nexen Inc.

Loans in the city total $47.8 billion since Dec. 31 versus $25.1 billion the same period of 2012, the data show.

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