Coordinating arrangers Industrial and Commercial Bank of China (Asia), Agricultural Bank of China, WestLB AG and China Everbright Bank launched a $238 million transferable loan certificates facility for Cosco (Hong Kong) Group into general syndication last week. Syndication is slated for close on October 22 with signing scheduled for mid-November.
The facility is split into two tranches of five-year (Tranche A) and 6.5 year (Tranche B) maturities paying a margin of 120bp and 138bp respectively. Tranche A pays arrangers with $15 million or above a front-end fee of 50bp (all-in of 130bp), while lead managers and senior managers receive 35bp (all-in of 127bp) and 25bp (all-in of 125bp) for commitments of $10-$19 million and $3-$9 million respectively. Tranche B pays 110bp (all-in of 155bp), 91bp (all-in of 152bp) and 78bp (all-in of 150bp) to the participating banks for similar commitments as in Tranche A. Banks can participate in either or both of the two tranches.
The pricing on the bullet deal is tighter than previous borrowings. The borrower's last visit to the loan markets was in April this year when it tapped a $228 million loan-style FRN. According to figures supplied by Dealogic, that deal was split into three tranches - two tranches of five-year and one tranche of seven-year maturity for $144 million, $44 million and $40 million respectively.
The five-year tranches paid a spread of 140bp over Libor, while the seven-year tranche paid 150bp over Libor. Prior to that Cosco (Hong Kong) had tapped a two-tranche five-year $110 million facility split into a term loan and a loan-style FRN paying a margin of 175bp over Libor.
While the facility is fully underwritten by the arrangers, the presence of China Everbright Bank in the arranger group raised some eyebrows. One observer remarked that this is an indication that the deal could see more participation from PRC banks. Cosco (Hong Kong) is the wholly owned subsidiary of China Ocean Shipping Co (Cosco), the largest shipping company in the Mainland.
Cosco subsidiaries regularly tap the loan markets. Most recently in July 2002, Florens Container successfully borrowed $90 million through a five-and-a-half year loan paying a spread of 72.5bp over Libor. ING and Rabobank arranged the deal for Florens, a wholly owned subsidiary of Hong Kong-listed Cosco Pacific, which itself is subsidiary of Cosco. Cosco Pacific has a 50:50 joint venture with Hong Kong International Terminals, Cosco-HIT, which tapped a HK$2 billion five-year term loan at a margin of 37bp over Hibor in August.
Should the deal be oversubscribed, Cosco HK will upsize it to a maximum of $250 million. Part of the proceeds from the transaction will go toward repayment of a convertible bond maturing in March 2003. Cosco Treasury raised $150 million through the convertible bond issue in March 1998.
ICBC and WestLB are the bookrunners for the loan transaction, while Agricultural Bank of China is the documentation agent. ICBC is also the facility, signing and publicity agent for the deal.
Cosco (Hong Kong) is involved in a number of businesses ranging from shipping and container leasing to manufacturing, property, infrastructure, technology and financial services.
