Companies confident to wade back into debt
"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.
Frequently Asked Questions about this Article…
Analysts expect Australian syndicated loans to total between $75 billion and $85 billion in 2013, making it the third‑busiest year on record, according to NAB. That follows a record $115 billion in 2011 and an $81.6 billion year in 2012.
Loan margins are narrowing because global credit markets have rallied, which reduces banks' funding costs. NAB says this makes syndicated debt cheaper for companies and can encourage more business lending and M&A activity.
Several high‑profile deals are contributing to syndicated lending: TPG Capital’s acquisition of poultry producer Inghams, Qantas working to refinance an existing facility, M2 Telecommunications borrowing to buy rival phone companies, and Billabong awaiting provisional private‑equity approaches.
Lenders are set to syndicate about $750 million of debt to fund TPG’s acquisition of Inghams. Reports say TPG bought Inghams for about $880 million with roughly $775 million in loan commitments from seven banks, including three of Australia’s four biggest lenders plus global banks such as Bank of America, HSBC, Macquarie and Nomura.
Bloomberg‑compiled data showed borrowers signed about $4.5 billion of syndicated loans in Australia since December 31, down from $5.3 billion in the same period in 2012.
Yes — a source in the article said Qantas is working to refinance an existing facility. For investors, refinancing can mean the airline is managing its debt profile, potentially taking advantage of lower margins or extending maturities, though specifics depend on the final terms.
According to NAB’s head of capital markets, companies still hold a lot of cash but sentiment is improving and M&A discussions are increasing. Firms are using syndicated debt to fund acquisitions, refinancing and strategic transactions even while maintaining cash buffers.
The US syndicated lending market was stronger in the same period, rising about 15% to $325.9 billion. By contrast, Australian syndicated volumes were smaller — $81.6 billion in 2012 and an expected $75–$85 billion in 2013 — reflecting different market sizes and deal activity levels.
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