China slowdown and currency volatility hit Asian lending

Wed Sep 30, 2015 3:39am EDT
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By Prakash Chakravarti

Sept 30 (IFR/LPC) - Syndicated loan volume in Asia Pacific (excluding Japan) fell by 16 percent to $324.2 billion in the first nine months of 2015 compared to a year earlier. Activity dwindled in the third quarter as effects of China's continued economic slowdown and currency devaluation rippled through global markets in September.

The third quarter saw $110 billion of loans in 366 deals, as investors stood back in a 'risk-off' environment as fears of China's slowdown caused a rout in its stock market and dragged commodities prices lower.

Lending has fallen so far this year in almost every major loan market in Asia, with the exception of Taiwan, due to slower economic activity and bank returns are under pressure with fewer opportunities to lend. Across Asia, 974 deals were completed in the first nine months, compared to 1,314 loans in 2014.

"Banks that look at plain vanilla deals only or just buyout event deals have felt the strain," said Boey Yin Chong, head of syndicated finance at DBS Bank.

Despite its economic and fiscal woes, China continued to dominate the region with volume of $100 billion in Q1-Q3 2015, accounting for 31 percent of all lending in Asia, excluding Japan.

The surprise devaluation of the renminbi prompted some Chinese borrowers to reduce foreign currency loan exposure, including manganese metal maker Hong Kong Tian Yuan Manganese International Trade Co Ltd, which put a $150 million loan on hold, days after launching it to syndication in September.

In September Minsheng Financial Leasing Co Ltd also sought to revise the terms of a three-year bullet loan, including reducing the size and cutting the tenor and pricing, after deciding to increase it to $250 million from an initial $200 million. In late August luxury car dealer Zhongsheng Group Holdings Ltd cut the size of its three-year term loan to $200 million from $250 million.

Foreign currency loans for Chinese companies had already started to slow from early 2015, well before the People's Bank of China moved to devalue its currency on August 11. In the first three quarters of 2015, foreign-currency loans for mainland borrowers dropped to $8 billion from 18 transactions, compared to $15.6 billion from 25 deals in the corresponding period in 2014.   Continued...