By Jacqueline Poh
COFCO Corp, China's largest grain trader, is raising a $3.2 billion syndicated loan to back its acquistion of Noble Group's agribusiness arm and repay a shareholder loan, banking sources said on Wednesday.
The loan for state-owned COFCO is the biggest offshore loan for a Chinese company this year, and comes as offshore borrowing by Chinese firms is slowing as Hong Kong's regulators attempt to curtail lending.
Noble said in April that COFCO would pay $1.5 billion to buy a 51 percent stake in Noble Group Ltd's agribusiness which will combine COFCO's grain processing and distrubution business in China with Noble's grain sourcing and trading arms in a joint venture.
$1 billion of the loan will be used for the acquisition and the remaining $2.2 billion will repay the shareholder loan, banking sources said.
The deal is also one of the most tightly priced offshore loans for a Chinese company this year.
COFCO is asking for an interest margin of 100 basis points (bps) over Libor on the $1 billion, one-year tranche and 135bps on the $2.2 billion, five-year tranche.
That price has only been bettered by a $2 billion, one-year loan for Aa3-rated, state-owned oil and gas firm CNOOC, which paid 75bps in February.
COFCO's new one-year tranche has no fee, and the five-year tranche offers fees that give all-in pricing of below 150bps.
At least eight relationship banks have been invited to join the deal and can choose to join only the five-year tranche or both tranches.
Mixed response
Rising funding costs are curbing banks' appetite for finely priced Asian loans. Taiwanese banks, which were previously among Asia's most active lenders, are looking for higher interest margins as a result.
Attempts by the Hong Kong Monetary Authority to clamp down on lending to privately owned Chinese companies are also starting to hit volume.
Lenders are wondering whether China's state-owned companies will be able to continue to command tight pricing in this environment.
"Pricing is too thin and it will be difficult to get approval," a lender looking at COFCO's deal said.
Some banks may however be swayed by the rare opportunity to lend to a strategically important company, which is one of the largest of China's state-owned companies.
"This is a one time only opportunity to lend to COFCO, and a rare chance to lend a big ticket," another lender said.
COFCO has never borrowed more than $200 million from the syndicated loan market before, in deals raised through its Hong Kong subsidiaries.
Moody's affirmed COFCO (Hong Kong) Ltd's A3 issuer rating after the acquisition.
COFCO (Hong Kong) is a wholly owned offshore subsidiary of COFCO which holds the group's key assets, including stakes in eight listed companies.
The company's main businesses include agricultural products trading and processing, food and packaging, and property investment and development. COFCO reported revenues of HK$135 billion ($17.4 billion) in the 12 months to June 2013.
