With the SARs crisis seemingly averted following the removal of Hong Kong and China from the World Health Organisation's list several Hong Kong blue chips have been eyeing a return to the market. Hongkong Land has become the first big name to take advantage by launching a HK$4.7 billion ($602 million) seven-year fundraising on Wednesday.
Banks have been invited to join at a margin of 42bp over Hibor and can earn front end fees on three levels. Arrangers absorbing HK$200 million ($25.5 million) receive 45.5bp, co-arrangers committing HK$100 million ($12.8 million) to HK$190 million ($24.4 million) are paid 35bp and senior managers providing HK$50 million ($6.5 million) to HK$90 million ($11.5 million) gain 28bp.
This fundraising will be used to refinance the borrowers existing facility - a HK$6.38 billion ($818 million) credit arranged by BOCI Capital and HSBC in March 2001. That deal paid top tier arrangers with HK$200 million ($25.5 million) tickets an all-in of 60bp in the seven-year tranche, substantially higher than the 48.5bp on offer for the current financing.
Market observers have suggested that this deal may be forced to compete with the HK$3.8 billion ($487.25 million) transaction for Hutchison, which is priced at an almost generous 51bp all-in to underwriters for five years. In addition to this loan there are several facilities that have emerged for borrowers further down the credit curve providing substantial yield pick-ups to the blue chip corporate sector.
Following Victory City International's successful HK$288 million ($37 million) credit signed earlier this month, several other second tier corporates have tapped the market. Giant Wireless Technology came to the market through DBS at 140bp for an average life of 2.33 years for HK$150 million ($19.2 million), while Standard Chartered has just closed a HK$350 million ($45 million) credit for Asia Printers that paid a margin of 180bp and a top tier fee of 75bp.
DBS recently secured further mandates for Eastern Asia Technology and Surface Mount Technology along with BNP Paribas. These deals are due to be launched into general syndication shortly, although no pricing indications have as yet been set.
All of these deals have attracted great interest from the market and many have received overwhelming responses. These have resulted in substantial oversubscriptions and the borrowers have been able to increase the size of their deals.
Bankers say the apparent explosion of mandates can be attributed to the success of previous deals as well as the pent up demand due to the SARs epidemic. Many suggest that SARs could affect deal flow in the second half as little ground work was performed while Hong Kong was on the WHO list.
Analysts dismiss the possibility of these deals causing problems for the Hongkong Land financing as they are all relatively insignificant amounts. Furthermore they claim that the higher pricing on these transactions allow more banks to participate, therefore increasing the investor base and restricting the ticket sizes for lenders.
Sources suggest that although pricing is once again tight, it is likely the deal will be successfully completed as bankers know that if they do not lend at these levels then someone else will. Responses are due by July 14.
