Syndicated finance: DBS is tops in Asia-Pacific ex-Japan

Syndicated finance: DBS is tops in Asia-Pacific ex-Japan

DBS Bank has become the go-to bank for syndicated finance as its strong balance sheet and ability to structure complex loans help it win mandates from large multinationals, especially the global commodity houses.

According to Thomson Reuters, in Q1 2013, DBS was ranked the top arranger for syndicated finance in Asia Pacific (ex-Japan), followed by United Overseas Bank.

DBS did 20 deals valued at US$5.2 billion while UOB had 10 worth US$4.8 billion.

The rest of the Asia Pacific ex-Japan top 10 league table comprise Chinese and Australian banks.

Syndicated loans in the region in Q1 2013 came to US$60 billion, unchanged year on year.

Last year, the total was US$308 billion, down from 2011's record US$341 billion.

In 2012 and 2011, DBS ranked fourth with total deals of US$7.5 billion and US$8.3 billion respectively.

The 2008 global financial crisis (GFC), in which many international banks, especially European banks, retreated from Asia, provided the chance for DBS to show its mettle in leading major deals, said Boey Yin Chong, DBS head of syndicated finance.

"The GFC gave the opportunity to DBS to step up to the plate; it was not just balance sheet strength, we demonstrated the ability to structure complex deals," he told reporters on Monday.

DBS as well as other liquid Asian banks were able to step in when funding dried up in the international markets, especially US dollar liquidity.

Multinationals turned to Asia to fund their operations - in particular, commodity firms, many which have large operations in the region.

"We played a key role in this, bringing them to the liquidity of Asia," said Mr Boey. As South-east Asia's largest bank, DBS was able to capture a large share of the business as many of these firms have significant operations out of Singapore, running their regional business here.

Last year, syndicated loans for commodities houses reached US$12 billion, up from just US$600 million in 2006.

Singapore has grown to be the centre for commodity fund raising in the region, cornering more than 80 per cent, Mr Boey said. Of the 18 deals last year, 90 per cent of the borrowers are in Singapore, he said.

Key deals that DBS has done over the past 15 months include Glencore's US$12.5 billion and Noble Group's US$2.5 billion.

In China, DBS also scored big. Last quarter, it led CNOOC's US$6 billion deal for the acquisition of Canada's Nexen.

Mr Boey said that the ability to structure complex deals means that DBS is able to generate more fees.

DBS, together with five other banks, underwrote Alibaba Group's US$3 billion syndicated loan last year which was used to privatise the firm, delist it from the Hong Kong stock exchange and fund the buyback of its shares from Yahoo.com.

Part of the complexity of the transaction was that Alibaba's income is in yuan.

Having proven its ability to Alibaba, DBS is now believed to be in the running for the reported US$8 billion financing that the firm is seeking this year.

This year, many of the European banks, in particular the French banks, that are traditionally strong in syndicated finance have come back to Asia, after having completed their non-core asset sales.

As a result of the increased competition, margins are falling.

"Margins have dropped off but are still good compared to the hey-days (2005/2006)," said Mr Boey. He estimated that margins are down 10-15 per cent from last year.

"Top-grade Hong Kong companies used to pay around 50 basis points per annum in 2006, versus around 150 basis points per annum now, for long-term borrowings," he said.

"Return of the European banks will be a challenge, they can be quite a force in India, Indonesia and Hong Kong."

Still, Mr Boey is unfazed, as he expects the European banks to be more focused on their clients. "They'll take their time, they won't come back in a very strong way."

Asia-Pacific loan volumes this year should rise 10 per cent over 2012, driven by valuations and liquidity as the cost of funding has come down, he said.


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