Gunvor Group is providing a 20bp greater margin on its newest Asia-targeted syndicated loan, within the first take a look at of recent pricing ranges for the commodities sector because the coronavirus outbreak.
The Swiss dealer’s South-East Asia unit, Gunvor Singapore, has launched a US$500m one-year refinancing with top-level all-in pricing of 190bp based mostly on an curiosity margin of 115bp over Libor.
These price factors are 20bp and 15bp richer, respectively, than the margins on a US$455m one-year deal the borrower signed in June 2019. Gunvor’s 2019 financing attracted 22 lenders, together with six lead arrangers. In distinction, this 12 months’s deal is self-arranged.
“Pricing needs to be changed to reflect increased in funding costs to most banks,” mentioned a Singapore based mostly loan syndications banker. “It’s the quantum of increase that will be most intensely negotiated.”
Gunvor is usually the primary amongst a number of commodity merchants that faucet the syndicated loan markets in Asia (ex-Japan) yearly, and the response to its newest deal can be intently watched by different commodity credit which can be anticipated to return within the second half of the 12 months.
Between August and October final 12 months, the Asian subsidiaries of Louis Dreyfus, Mercuria Power Buying and selling and Trafigura Group, together with Olam Worldwide, closed loans totalling US$4.88bn.
Louis Dreyfus is anticipated quickly because it has a US$500m three-year revolving credit score facility due in September. The Netherlands-headquartered commodities dealer’s Asian arm was sounding out relationship banks for a brand new loan in April, however put that on maintain pending the closing of a separate loan within the US first, banking sources mentioned.
The commodities sector has been hit onerous by the coronavirus pandemic, with plunging costs pushing quite a few corporations into monetary problem.
Singapore-based Hin Leong Buying and selling was positioned underneath the administration of a court-appointed supervisor in April with money owed of over US$3bn, after it was caught out by the stoop in demand for oil and did not safe new credit score strains. It additionally admitted to hiding US$800m in futures losses over a number of years and mentioned it had already offered numerous its stock, based on court docket filings, leaving its 23 lenders liable to heavy losses.
Smaller commodity gamers are already going through stress and threat being lower off from essential funding. Earlier in Might, HSBC filed a court docket software to put Singapore oil dealer Zenrock Commodities Buying and selling underneath judicial administration over non-payment of dues and different points.
In March, Hontop Power, an oil dealer linked to a Chinese language refiner, went into receivership, blaming cratering demand on account of Covid-19. The identical month Singapore’s Excessive Courtroom rejected commodity dealer Agritrade Worldwide’s request for a debt moratorium on US$1.55bn in excellent liabilities to dozens of collectors, together with US$983m owed to secured lenders. No less than 20 banks face losses from the collapse of Agritrade.
“It is bad timing for the commodity companies to refinance because of the Covid-19 impact and Hin Leong default,” mentioned a second Singapore-based loans banker. “Banks are more cautious now and borrowers have postponed deals for these reasons.”
FLIGHT TO QUALITY
Whereas the commodities sector continues to see price volatility, not all commodity merchants are anticipated to wrestle with their fundraising plans.
Bankers consider that the bigger, stronger gamers – together with the likes of Swiss companies Mercuria and Trafigura and Singapore-based agri-business Olam – would be capable to navigate uneven markets.
“I believe the crisis is mostly affecting the smaller, Asian trading houses,” mentioned a Singapore-based relationship supervisor at a Chinese language bank. “International banks will continue to support the larger, global trading houses, although participation will be limited to just the refinancing amount and not incremental amounts.”
The primary Singapore-based loans banker mentioned: “There will be a flight to quality. The top-tier ones with transparency over their structured trade financings will survive. Those that are less forthcoming or smaller will suffer.”
Others consider that the composition of the syndicate of lenders may even shrink.
“A 30-bank syndicate for the top-tier commodity names is a thing of the past,” mentioned one other senior Hong Kong-based loans banker. “Smaller banks that previously were participants in commodity deals are unlikely to feature this time.”
Given the troubles the sector faces and the risk-aversion from lenders, syndicated lending for commodity credit may take a success this 12 months, exacerbating a slowdown final 12 months when such loans raised US$15.41bn from Asia (ex-Japan), based on Refinitiv LPC information.
The 2019 tally for syndicated loans from the commodities sector within the area was 4.17% decrease than the US$16.08bn raised in 2018 and a far cry from 2014’s US$29.33bn, which was a document since 2009.
Supply: Reuters (Reporting By Chien Mi Wong and Mirzaan Jamwal; Enhancing by Prakash Chakravarti and Steve Garton)