Leveraged finance continues to face headwinds following a difficult 2015 as slowdown in the region and muted M&A dampen overall activity. But with China’s Going Abroad strategy remaining intact and consolidation among corporates likely to pick up, leveraged finance could see a revival during the rest of 2016.
Underpinning this turnaround is the liquidity in the region and especially in the domestic markets. Competition among banks for assets as well as price compression will both remain a feature as international banks have to contend with domestic banks bidding for deals. This should provide a fillip to borrowers that may be looking at where next to deploy their excess capital especially in snapping up undervalued assets during the current more challenging business environment.
China features at the top of the most active markets especially for episodic corporate exercises. One the largest M&A in Asia is state-owned China National Chemical Corp’s (ChemChina) planned US$43 billion acquisition of Swiss seeds and pesticide maker Syngenta AG, which is now being vetted by the regulators. Even so, two consortiums of banks, including one led by Citic Bank International, are battling to be the chosen syndicate to help finance the deal.
China’s richest businessman, Wang Jianlin, is also busy reconstituting his group. In early May 2016, Wanda Cinema Line, China’s largest cinema chain operator acquired Wanda Media for US$5.8 billion. A few weeks later, TheAsset.com reported that Dalian Wanda was on the move again this time acquiring an additional 14.4% stake in its Hong Kong entity, Dalian Wanda Commercial Properties, for US$4.43 billion.
Some of the corporate restructuring exercises involved Western multinationals deciding to cash in selling their business to hungry Asian business groups. Thailand’s richest man, Charoen Sirivadhanabhakdi, controlling shareholder of the TCC group, won the battle to acquire the 59% stake of France’s Casino Group in Big C Supercenter for €3.1 billion. Meanwhile, another leading Thai family, the Chirathivat family, controlling shareholder of the Central Group, won the bidding for Big C Vietnam agreeing to pay US$1.1 billion to the Casino Group. Both deals attracted strong interest from both domestic and international banks.
What is the likely trend in the leveraged finance business in Asia for the rest of the year? What are some of the key deals that have come to the market and how will they be financed? Will competition among international and local banks remain? What about price compression and what might this mean for banks facing higher cost of capital? Will we see a revival in the high yield bond market as a possible take-out of some of these leveraged finance deals?
The Asset Events is pleased be hosting a dialogue with the leading leveraged finance banks to discuss the shape of the business and what the future looks like.
