raelyneustasia

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Loan market activity in Hong Kong is poised to surpass the 2011 record as more China-based companies look offshore for funding.

Hong Kong loan volumes have reached US$44bn year to date, on track to beat the US$46.42bn raised in 2011. It is also rivalling Australia’s US$46.55bn tally as 2013’s busiest loan market in the Asia Pacific, excluding Japan.

The bulk of the growth is attributable to Chinese borrowers, which are stepping up their search for overseas funds with PRC authorities tightening credit onshore.

“The increased activity is a result of a number of factors, including tighter liquidity conditions onshore that is pushing borrowers offshore, greater aspirations of Chinese companies to build an international profile and firms having grown in size and scale such that relying only on a handful of onshore lenders for funding is no longer practical,” said Amit Lakhwani, head of loan syndicate and distribution, Asia, at Standard Chartered.

Until the end of July, some US$33.72bn involving 62 transactions in Hong Kong, including those in the pipeline, came from Chinese borrowers. Nearly two-thirds of those were privately owned enterprises, accounting for US$20.5bn in the first seven months of 2013 – close to the US$20.7bn all Chinese entities raised in Hong Kong in 2012.

A slew of big-ticket M&A financings such as the US$8bn loan for e-commerce giant Alibaba Group and the US$1.075bn leveraged buyout financing for Focus Media Holding, among others, have contributed to the flow. Whereas Chinese companies may have preferred to fund their overseas expansion with local loans in the past, more are turning to the international markets.

That move is adding new depth to the Hong Kong loan market, traditionally better known for tightly-priced club deals for local blue-chip property developers. Offshore China loans syndicated in Hong Kong have come from a wide variety of credits, including mid-tier and first-time borrowers, which have gained acceptance in the international lending community.

“A greater level of maturity has developed among Chinese borrowers and foreign lenders are more sanguine about these credits because of increasing structuring and discipline. The responses to Alibaba and the recent Huawei Technologies financing a couple of months back are proof of the appetite a