The loan syndication market in Asia-Pacific, outside of Japan, continued to shrink in the first nine months of 2016 due to limited credit demand. In the lowest nine-month volume since 2013, syndicated lending in the region declined 8.7% during the period to US$334.4 billion. Loans during the third quarter alone also dropped to a three-year low to US$93.6 billion.
In terms of deals, the number likewise plunged 11.5% to 925 deals year-on-year, and only 225 deals were completed in the third quarter – the lowest quarterly deal count in six years since the first quarter of 2010.
Figures released by Thomson Reuters on September 30 showed that China remained the largest contributor to the loan syndication market, but the volume for the first three quarters slumped 11.2% to US$107.3 billion from US$120.9 billion in the corresponding period in 2015, despite a rebound in the second quarter. Undoubtedly, the prolonged economic slowdown and the cautious stance that the borrowers adopted while evaluating their financing requirements are weighing heavily on the loan volume.
Infrastructure-related financing was the main driver of the country’s lending activity, representing 44% of China’s loan volume.
Hong Kong was the second most active loan market in the region and one of those that exhibited loan growth during the first nine months of 2016. Loan volume during the period surged 27.6% to US$80.4 billion from US$63.1 billion in the same period a year ago. The market continued to benefit from offshore Chinese borrowings, which represented more than 63% of the total issuance.
The most defining transaction during the period was the US$12.7 billion recourse loan to China National Chemical Corporation to fund its US$43.45 billion acquisition of Swiss seeds and pesticides company Syngenta.
India and Indonesia were the two other major Asian countries registering loan syndication increases during the first three quarters of 2016. The loan volume from India rose 14.7% to US$16.1 billion from a year earlier as blue chips and state-owned companies accessed the offshore loan markets to raise capital. The oil and gas companies dominated the fund raising activity with total deals amounting to US$6.5 billion.
Indonesia posted an 11.4% rise in loan volume to US$7.7 billion at the end of September 2016, underpinned by two sizable transactions completed in the third quarter – the US$2.045 billion commercial portion on the US$3.745 billion project financing loan for British Petroleum-led Tangguh 3 liquefied natural gas project and a US$725 million refinancing deal for Export-Import Bank of Indonesia. Both transactions attracted robust demand with the Tangguh project garnering commitments from 13 lenders, while the oversubscribed Eximbank loan saw the participation of more than two dozen lenders.
The other major markets, meanwhile, such as Australia, Singapore and Taiwan had lacklustre nine-month periods. The total volume from Australia plummeted 28.9% to US$40.7 billion due to subdued M&A and project financing activity in 2016, while those for Singapore and Taiwan contracted by 34.5% to US$24.7 billion and 18.2% to US$23.5 billion, respectively/
In terms of proceeds, M&A-related loans jumped 45.2% to US$50.3 billion in the first nine months of 2016 from US$34.7 billion the year before. This already exceeded the 2015 full year amount of US$47.9 billion with the Chinese companies dominating the M&A financing landscape.
China’s role as the biggest loan market in the region is being reflected in the dominance of Chinese banks in the loan syndication league table during the nine-month period. The top five banks acting as mandated arranger were all Chinese banks, led by Industrial and Commercial Bank of China, followed by Bank of China, China Development Bank, Agricultural Bank of China and China Construction Bank.
