Global Crossing: Hutch phones home
Eleven banks have joined the arrangers, ABN Amro Bank, Citibank and
Commerz East Asia, at the sub-underwriting phase of Hutchison
Global Crossing's (HGC) HK$4.4 billion ($560 million) project
finance facility. The banks are: Abbey National, China Construction
Bank, ING Barings, CIBC, BNP Paribas, Credit Agricole Indosuez,
Credit Lyonnais, Sumitomo Mitsui, Rabobank, KBC and Natexis. A
low-key general syndication, currently underway, is expected to be
wrapped up shortly amidst strong appetite for the two tranche, term
loan deal.
According to Steve Weiss, head of ABN Amro's Hong Kong project finance department, sub underwriting banks are at their hold levels or below and the financing is now already 40% oversubscribed. Bankers say appetite has not been deflected by the HK$12 billion corporate funding being syndicated for Hutchison Whampoa at the same time. Apart from attractive pricing and a strong sponsor group (Hutchison and Asia Global Crossing) appetite is also being driven by the low volume of deals in the Asian marketplace.
?The financing community is experiencing some tension between banks cautious about or in some cases full up on exposure to telecoms related lending and the realization that there are budgets to make and revenue targets to earn. Budgetary pressures are forcing banks to look at the better deals in sectors which they might otherwise have avoided,? says a second Hong Kong based financier who participated in the HGC transaction.
The financing, which also includes an equity injection of HK$600 million, in addition to the HK$4.4 billion of debt will fund a project to link Hutchison's fibre optic telecommunications network and internet system in Hong Kong with Asia Global Crossing's international broadband cable capacity. Proceeds from the financing, will be used, say financiers, for capital expenditure purposes and to repay shareholders funds.
The deal when it closes (expected close date is mid-September) will have been in the making a long time, reflecting, say market sources, the fact that Hutchison tends to go for corporate style funding transactions rather than structured alternatives. ?It took a while for Hutchison to pick its way through the covenants and additional shareholder obligations in the documentation. These are tighter than it usually locks into,? says the anonymous Hong Kong banker. ?In highly structured transactions Hutchison always picks through the detail with a fine comb asking whether the covenants and obligations are absolutely essential,? the source adds.
Hutchison has been involved in its fair share of project financings, for example, to fund its UK 3G venture or to finance mobile telephony expansion in Hong Kong, but an additional level of comfort was required by the banks in this latest transaction because the development will hinge on Hutchison's success in multimedia and internet related business where it has not traditionally been a dominant local player.
The fundraising is split between a HK$2.2 billion five year portion paying a margin of 145bp over one, two, three or six month Hibor and a HK$2.2 billion seven year tranche which was priced at 180bp over Hibor. Repayment will be in quarterly installments commencing September 2004 for the five year tranche and September 2006 for the seven year tranche. The deal is secured by assets of the borrower including an undersea cable and fixed and floating charges over a fixed line license. Further backing has been provided via the comprehensive financial covenants package.
Fees have been established at two levels. Co-ordinating arrangers committing between HK$400 million HK$500 million are paid an underwriting fee of 27.5bp and a management fee of 47.5bp, says the Hong Kong based banker.
Arrangers taking between HK$300 million and HK$399 million receive a 17.5bp underwriting fee and a management fee of 47.5bp. Banks who join at the co-ordinating arranger level earn blended all-in fees of 181bp for an average life of six years.
Peter Ho, director at Citibank's Hong Kong project finance team, says that the pricing for the HGC deal is below that of most other cable or fibre-optic projects brought to market in the last 18 months ? including the FLAG Pacific-1 cable system fundraising last year led by Barclays Capital and WestLB which raised $1.1 billion for the expansion of Flag Pacific's sub-sea fiber optic network. This is despite the fact that the HGC deal is 100% market risk and does not include pre-sales contracts common to sub-sea cable projects. ?What the pricing partly reflects,? says Ho, ?is that this is a Hutchison deal in its home territory of Hong Kong, and banks are pretty comfortable with that given the comprehensiveness of the security package.?
The financing is also similar in structure, tenor and price to the HK$4 billion project loan taken by Hutchison Telecom in April 2000. That deal was non-recourse to Hutchison Telecom's main shareholders, Hutchison Whampoa, NTT Mobile Communication Network and Motorola.
According to Steve Weiss, head of ABN Amro's Hong Kong project finance department, sub underwriting banks are at their hold levels or below and the financing is now already 40% oversubscribed. Bankers say appetite has not been deflected by the HK$12 billion corporate funding being syndicated for Hutchison Whampoa at the same time. Apart from attractive pricing and a strong sponsor group (Hutchison and Asia Global Crossing) appetite is also being driven by the low volume of deals in the Asian marketplace.
?The financing community is experiencing some tension between banks cautious about or in some cases full up on exposure to telecoms related lending and the realization that there are budgets to make and revenue targets to earn. Budgetary pressures are forcing banks to look at the better deals in sectors which they might otherwise have avoided,? says a second Hong Kong based financier who participated in the HGC transaction.
The financing, which also includes an equity injection of HK$600 million, in addition to the HK$4.4 billion of debt will fund a project to link Hutchison's fibre optic telecommunications network and internet system in Hong Kong with Asia Global Crossing's international broadband cable capacity. Proceeds from the financing, will be used, say financiers, for capital expenditure purposes and to repay shareholders funds.
The deal when it closes (expected close date is mid-September) will have been in the making a long time, reflecting, say market sources, the fact that Hutchison tends to go for corporate style funding transactions rather than structured alternatives. ?It took a while for Hutchison to pick its way through the covenants and additional shareholder obligations in the documentation. These are tighter than it usually locks into,? says the anonymous Hong Kong banker. ?In highly structured transactions Hutchison always picks through the detail with a fine comb asking whether the covenants and obligations are absolutely essential,? the source adds.
Hutchison has been involved in its fair share of project financings, for example, to fund its UK 3G venture or to finance mobile telephony expansion in Hong Kong, but an additional level of comfort was required by the banks in this latest transaction because the development will hinge on Hutchison's success in multimedia and internet related business where it has not traditionally been a dominant local player.
The fundraising is split between a HK$2.2 billion five year portion paying a margin of 145bp over one, two, three or six month Hibor and a HK$2.2 billion seven year tranche which was priced at 180bp over Hibor. Repayment will be in quarterly installments commencing September 2004 for the five year tranche and September 2006 for the seven year tranche. The deal is secured by assets of the borrower including an undersea cable and fixed and floating charges over a fixed line license. Further backing has been provided via the comprehensive financial covenants package.
Fees have been established at two levels. Co-ordinating arrangers committing between HK$400 million HK$500 million are paid an underwriting fee of 27.5bp and a management fee of 47.5bp, says the Hong Kong based banker.
Arrangers taking between HK$300 million and HK$399 million receive a 17.5bp underwriting fee and a management fee of 47.5bp. Banks who join at the co-ordinating arranger level earn blended all-in fees of 181bp for an average life of six years.
Peter Ho, director at Citibank's Hong Kong project finance team, says that the pricing for the HGC deal is below that of most other cable or fibre-optic projects brought to market in the last 18 months ? including the FLAG Pacific-1 cable system fundraising last year led by Barclays Capital and WestLB which raised $1.1 billion for the expansion of Flag Pacific's sub-sea fiber optic network. This is despite the fact that the HGC deal is 100% market risk and does not include pre-sales contracts common to sub-sea cable projects. ?What the pricing partly reflects,? says Ho, ?is that this is a Hutchison deal in its home territory of Hong Kong, and banks are pretty comfortable with that given the comprehensiveness of the security package.?
The financing is also similar in structure, tenor and price to the HK$4 billion project loan taken by Hutchison Telecom in April 2000. That deal was non-recourse to Hutchison Telecom's main shareholders, Hutchison Whampoa, NTT Mobile Communication Network and Motorola.
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