Companies confident to wade back into debt
Australian syndicated loans will total as much as $85 billion in 2013, the third-busiest year on record, as a stronger economic outlook spurs acquisitions, said the nation's largest lender to companies.
"Companies have a lot of cash, and sentiment is slowly improving, so there are a few M&A discussions going on which will drive business lending," said NAB head of capital markets Steve Lambert last week. Loan margins are narrowing as global credit markets rally, reducing the cost of funding for banks, according to the Melbourne-based lender.
Lenders to TPG Capital will syndicate about $750 million of debt used to acquire poultry producer Inghams Enterprises, while Qantas is working to refinance an existing facility, a source said. M2 Telecommunications Group is borrowing to buy competing phone companies, and sports-wear company Billabong is awaiting bids from two private-equity groups that have made provisional approaches.
Borrowers signed $4.5 billion of syndicated loans in Australia since December 31, down from $5.3 billion in the same period of 2012, data compiled by Bloomberg shows. Volumes fell 29 per cent to $81.6 billion in 2012. An index of yield premiums on Australian-dollar financial bonds fell 71 basis points in the past year to 113 basis points more than the swap rate on Friday, near a five-year low, according to Bank of America Merrill Lynch index data.
US syndicated lending rose 15 per cent to $325.9 billion this year from the same part of 2012.
TPG bought Inghams for about $880 million with $775 million in loan commitments from seven banks in early March, a source said. The underwriting banks include three of Australia's four biggest lenders along with Bank of America, HSBC, Macquarie Group and Nomura Holdings, the source said.
Australian syndicated lending surged to a record $115 billion in 2011, after averaging an annual $71 billion over the previous five years, the data show. It is set to total between $75 billion and $85 billion this year, according to NAB.
InvestSMART FORUM: Come and meet the team
We're loading up the van and going on tour from April to June, with events on the NSW central & north coast, the QLD mid-north coast and in Perth, Adelaide, Melbourne, Sydney and Canberra. Come and meet the team and take home simple strategies that you can use to build an investment portfolio to weather any storm. Book your spot here.
Want access to our latest research and new buy ideas?
Start a free 15 day trial and gain access to our research, recommendations and market-beating model portfolios.Sign up for free