General syndication was launched earlier this week for Wharf (Holdings) HK$4.5 billion five-year term loan. The coordinating arrangers for the deal are a group of 11 banks - ABN AMRO, Bank of China, BNP Paribas, Citibank/SSB, Commerz East Asia, Hang Seng Bank, ICBC, Rabobank, Societe Generale, Standard Chartered and Sumitomo Mitsui Banking Corporation (SMBC). Commerz East Asia is the publicity agent for the transaction. Syndication closes on July 24.
The borrower is Wharf's 100%-owned special purpose vehicle (SPV), Success Record Ltd. The transaction, priced at a margin of 52.5bp over Hibor, pays arrangers all-in of 59bp (upfront fees of 32.5bp) for commitments of HK$200 million or above. Lead managers and managers committing HK$125 million to HK$195 million and HK$50 million to HK$120 million receive all-in of 58bp (upfront fees of 27.5bp) and 57bp (upfront fees of 22.5) respectively.
Proceeds from the current deal will repay a five-year loan of similar amount tapped by the borrower in June 2000. That loan was priced at a margin of 92.5bp over Hibor and guaranteed by Wharf (Holdings). More recently, in December 2001, Wharf Capital, tapped HK$2.25 billion each through three- and five-year loans priced at a spread of 50bp and 60bp over Hibor respectively.
In May this year, Wharf also raised HK$600 million through a dual tranche retail bond issue. The two- and three-year bonds pay a coupon of 3.68% and 4.36% respectively. Wharf has two other dollar bonds outstanding amounting to $550 million and rated Baa3/BBB. The two-year 8.875% 2004 and the five-year 7.625% 2007 bonds currently trade at 140bp and 145bp over Treasuries.
Wharf's net debt for 2001 increased to HK$19.8 billion from HK$19.5 billion, thereby increasing the net debt to equity ratio by two percentage points to 36% from a year earlier. Total debt to equity ratio stood at 43%. Says Albert Jan Hofman, head of fixed income research, Asia, BNP Paribas, "Based on their improved balance sheet, relatively prudent gearing and improved prospects for cash flow growth, Wharf's ratings should be upgraded."
Earlier in March, Wharf reported net profit of HK$2.52 billion for the year ended 2001, a 1% increase on the previous year. Although turnover from property development was lower by nearly 50% year-on-year, Wharf's communication, media and entertainment (CME) division offset the decline with a 21% increase in turnover. The CME division's stellar performance was mainly attributed to the turnaround of i-cable, Wharf's 79%-owned subsidiary that registered a whopping 735% in net profit.
With the return of Peter Woo as chairman of Wharf Holdings, the company has restructured its existing business activities and formed a new unit, Wharf China, to handle its assets related to the Mainland. The assets include Modern Terminals Ltd. and its investments in Chinese terminal ports, the Marco Polo Hotel in Beijing and property in Chongqing and Shanghai.
