By Prakash Chakravarti
Dec 30 (Reuters) - Syndicated lending in Asia Pacific(excluding Japan) scaled new heights in 2014 to $523 billion asdemand from Chinese companies continued to increase despite aneconomic slowdown and regulatory constraints, helping regionalloan volumes surge 13 percent higher than the $462 billionclocked in 2013.
Loan activity created history with volumes crossing the $500billion mark, quite remarkably in a short period of time sincethe 2008 global financial crisis. At the start of the millenniumloans transacted in Asia (ex-Japan) totalled $110 billion andonly breached the $200 billion mark in 2006.
In a repeat of the previous year, China set the bar higherwith loan volumes in 2014 reaching $141.31 billion, a 20 percentincrease over 2013. Hong Kong continued to benefit fromChina-related deal flow with loan volumes hitting a record of$92 billion as Chinese borrowers propelled borrowing activitynearly 15 percent higher year-on-year.
Increased volumes in China, Hong Kong and Macau boostedNorth Asian numbers to $276 billion, around 13 percent higherthan $244 billion in 2013. Outbound M&A loans, project andinfrastructure financing in China accounted for the bulk of thetransactions in 2014.
"China will continue to throw up acquisition financingopportunities that will drive loan volumes up, in North Asia,"said Aditya Agarwal, head of loans, Asia at Royal Bank ofScotland.
Others agreed pointing out that M&A financing activity couldincrease over the next year.
"Given the significant drop in oil prices, we expect someM&A and related financing opportunities to arise from the oil &gas and ancillary industries sector," said Ashish Sharma, headof loan syndications, Asia Pacific, at Credit Suisse.
M&A activity accounted for more than 11 percent of AsiaPacific (excluding Japan) loan volume in 2014, at $57.1 billionvia 42 deals. It marked the highest level since 2007 when M&Aloan volume reached $80.8 billion.
In 2014, the largest M&A financing was the $6.96 billionloan backing Hong Kong-listed MMG Ltd's purchase ofthe Las Bambas copper mine in Peru from Glencore Xstrata Plc. Other acquisition financings of note were the HK$38.4billion (US$4.95 billion) loan backing Singapore's OCBC Bank's takeover of Hong Kong-based Wing Hang Bank, COFCOCorp's $3.2 billion loan for its acquisition of Noble Group's agribusiness and the HK$37 billion financing for PowerAssets Holding's spinoff of Hongkong Electric Co Ltd.
While M&A activity from China was expected to be robust, thepace of privatisations of US-listed Chinese companies hascertainly slowed down leading to lower expectations of leveragedbuyouts from the country.
"The volume of take-privates of US listed Chinese companiesis slowing, as many have transacted in the past few years.Future activity is always possible, as major shareholders' viewson the merits of a take-private evolve," said Clayton Carol,head of debt capital markets, Asia (ex-Japan) at Nomura.
Although China loan volumes recorded an increase over theprevious year, it is worth noting that exposure to Chinesecredits was a thorny issue for regulators in Hong Kong,Singapore and Taiwan. Making matters worse were instances ofpoor corporate governance among some borrowers that cast a pallon privately owned entities and made lenders wary of suchcredits.
CHINESE DOMINANCE
With China accounting for around 27 percent of the loanvolumes from Asia (ex-Japan), it is no surprise that Chineselenders topped the mandated arranger league tables. Industrialand Commercial Bank of China, which ranks among thelargest banks in the world by market capitalisation, trumped itsrivals in Asia (ex-Japan) to top the mandated arranger leaguetables for 2014 with a market share of 8.8 percent.
Bank of China, which held that position in 2013,slipped to number two in 2014, while China Development Bank,which ranked second in 2013, slipped one notch in 2014.Australia and New Zealand Banking Group and HSBC took fourth and fifth spots respectively. (Reporting By Prakash Chakravarti; editing by Sharon Klyne)
HSBC Holdings (HSBA)
Glencore (GLEN)