Thursday, January 3, 2013

Commodities, real estate drive Singapore loans to US$33b


Business Times
JANUARY 03, 2013

After surging to a record in 2011, Singapore loan volume slid 19 per cent in 2012 to US$33 billion via 93 deals, according to Thomson Reuters LPC.

But several jumbo Singapore dollar deals and a slew of commodity borrowers returning for US dollars helped make it the second-highest volume ever.

First-half volume was bolstered by two Singapore dollar mega deals - the $5 billion self-arranged property development loan for M+S, and Marina Bay Sands' $5.1 billion refinancing.
The second half was supported mainly by commodity and energy names, while real estate borrowers were active throughout the year.

Club loans continued to dominate, making up nearly half the total volume.

Many of the sizeable deals were clubbed - including the M+S loan, YTL PowerSeraya's $2.6 billion refinancing, and Senoko Energy's $1.075 billion refinancing - with that same trend likely to continue.

"Clients hoping to keep their relationship banks happy as well as maintaining pricing at a low level will continue to drive club deals into the new year," said Dominic Lim, head of loan syndication at OCBC Bank.

Commodity borrowers returned to the market in 2012, supplying dealflow for US dollar loans.

More than 10 commodity financings were completed during the year. There were familiar names such as Gunvor, Vitol and Wilmar, while Gazprom and Duferco were two European companies tapping the Asia market for the first time.

Borrowers revisiting the market faced higher US dollar funding costs.

One-year all-in pricing for these commodity names had risen, with increases ranging from about 25bp to 55bp. All-in pricing for Gunvor increased to 290bp in 2012 from 2011's 235bp, while Wilmar's one-year extension saw pricing rise to 150bp from 95bp.

Real estate credits continued to command tight pricing, due to abundant Singapore dollar liquidity and their strong relationship bank networks.

The $5 billion, five-year loan for M+S paid an all-in of around 110bp. CapitaLand paid all-ins of roughly 130bp on two separate five-year construction loans.

Pricing for other top names was also squeezed. PowerSeraya, on its $2.6 billion loan, paid an average blended weighted all-in in the 120s for an average life of 5.3 years.

Bankers expect spreads to remain tight in 2013 because of rich liquidity in the region and lower US dollar funding costs.

"Pricing compression would be expected because of the strong liquidity from lenders in the domestic markets in Asia and the increasingly lower cost of US dollar funding for lenders in general," said OCBC's Mr Lim. "And it doesn't help that the low interest rate environment and strong debt issuance are also giving loan bankers a run for their money."

Loan bankers are counting on acquisition financings in the pipeline to bring excitement in 2013.

In late 2012, Singapore's Fraser & Neave was the focus of a bidding war between Thai billionaire Charoen Sirivadhanabhakdi and a consortium led by Overseas Union Enterprise, controlled by Indonesia's Lippo Group. Companies linked to Mr Charoen and OUE had lined up jumbo financings to back their bids.

"I think 2013 dealflow looks promising and the wild card will be the string of M&A deals that are ongoing around the region. These are fairly sizeable transactions, and if they all come to fruition it will certainly move the needle in terms of overall loan volumes for 2013," said David Lim, head of structured finance and syndications at CIMB Bank.


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