Asia Sees Revival in Jumbo Corporate Loans

Asia is seeing a revival in jumbo corporate loans, encouraged by large mergers and a return of European banks to the market, reports the Wall Street Journal.

 

In the first quarter of the year, Asia has already seen seven jumbo corporate loans, according to Dealogic. Cnooc Ltd.'s US$6 billion bridge loan for its $15.1 billion purchase of Canada's Nexen Inc. is the largest. Lenders to Cnooc included UBS AG, Société Générale and Credit Suisse AG, according to the journal.

 

Meanwhile, Alibaba Group Holding Ltd. is seeking up to $8 billion to refinance debt. The loan would be the fifth-largest in Asia on record, according to Dealogic data.

 

Any loan of more than $1 billion is a considered a jumbo loan.

 

In the past couple of years, European banks withdrew their lending activities from Asia to focus on deleveraging and restructuring in their home markets. But they are now moving back to lending, especially to blue-chip firms.

 

"Loans are clawing their way back as banks in Asia are extremely liquid and are offering aggressive terms, especially for blue-chip firms and for event-driven financing," Amit Khattar, managing director and Asia head of loan trading and syndication at Deutsche Bank AG, told the journal.

 

Last year, "many Asian companies turned to bond financing driven by lower coupons and stretched tenors, thereby cannibalising the loan markets to a certain extent," Khattar said.

 

Bond issuance in Asia rose to a record high of $879.7 billion last year, according to Dealogic.

 

As many companies turned to bonds last year, loan volume in the region fell 8% to $293 billion, according to Dealogic.

 

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