in Asias leveraged finance market expect transactional
innovation to play an increasingly critical role in the sector
this year, as banks struggle to boost deal flow in the
market conditions have created something of a perfect storm
this year for banks and corporates in the region. The slowdown
in European and US markets has discouraged corporates from
M&A activity, and the EU crisis has prompted European banks
in particular to cut headcount and curtail activity outside of
their home markets.
Asia-Pacific leveraged finance head, Lyndon Hsu, told
IFLR that a maturing Australian and New Zealand
market, where corporates are now better managed, has also left
less room for earn-out and cost-out opportunities for
said there are consequently now very few companies in any
sector with good top-line growth stories of between 2 and 5%.
For 2012 deal flow is considerably down, he
the regions more nascent markets such as China and
Southeast Asia, however, the proliferation of family-managed
companies creates a logistical nightmare for would-be
this environment, he expected the focus would increasingly
shift to the non-traditional in a bid to boost business as deal
market has seen some notable deals this year. CVCs
buy-out of City Telecom this month, in a transaction involving
HKD2.5bn leveraged acquisition facilities, is one of only a
handful of Hong Kong buy-outs in the last seven
month saw the launch of a privatization of Hong Kong-listed
Alibaba Group in a $3 billion financing, split as a $1 billion,
three-year term loan, and a $2 billion one-year
David Irvine, who is acting for JPMorgan and Standard Charted
Bank as arrangers on the CVC deal said the transaction showed
there was still appetite for well structured transactions with
good credit stories in the market.
said banks in the region were keen to get involved in the
Alibaba transaction too, not only for its size but also for the
non-vanilla aspects of its structure.
expected banks would begin to look more and more to the small
to mid-cap market for opportunities in both the leveraged
finance and M&A space.
small to mid cap with your pre-existing institutional business
could generate significant untapped revenue or income from a
customer base that has until recently been overlooked by a lot
of the banks, he said.
expected to see more deals with a high yield element as well,
particularly among those companies with a US nexus. High
yield issuance is very popular in the US presently, and so
those with a US connection will be familiar with the financing
structures, risks and rewards associated with the
product, he said.
& Ellis Hong Kong-based debt finance partner, Ashley
Young, agreed the use of high yield was set to become more
common in Asian deals, including for recapitalisation
thought that the trend would continue notwithstanding the
liquidity that may be available from banks for the right
may also see some secondary buyouts adding to the supply of
deals, provided the exit multiples make sense, to support
continuing fundraising efforts by sponsors for Asian
funds, he said.