“Syndicated lending in Asia fell to the least in two years in 2012 as companies use their bank relationships to strike cheaper bilateral or club deals in the private market.
Lending volumes in the Asia-Pacific region outside of Japan slumped 17.6 percent to $376.4 billion last year from $456.8 billion in 2011, according to data compiled by Bloomberg. Average interest margins for dollar-denominated loans increased 15 basis points to 273.6 basis points, versus a rise of 40 to 351.8 in the U.S., where the decrease in syndicated debt was a smaller 14.8 percent.
At the same time as the economy slows, reducing companies’ willingness to make new investments and expand, higher-rated borrowers in Asia are finding that reverting to loans which aren’t marketed to a wider group of banks in syndication is a more competitive source of funding. The rise of Japanese and Chinese bank participation in some parts of the syndicated market meanwhile is reducing costs, with other lenders forced to match lower rates or bow out of transactions.
“High-grade borrowers are turning maturing facilities into bilateral loans because they can leverage their relationships to get better pricing and more favorable terms,” Priscilla Lee, the head of northeast Asia loan syndications at Bank of Tokyo- Mitsubishi UFJ Ltd., said in a Dec. 14 interview. “Many don’t care to go to the syndicated market….”
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