The largest lender in Sri Lanka by way of assets is eyeing the international syndicated loan market for a $100m fundraising that comes with a greenshoe of the same size. It is being arranged by Deutsche Bank.
In its last visit to loans in 2013, the Sri Lankan lender primarily tapped Middle Eastern liquidity, choosing Emirates NBD to lead the deal. This time it is looking to get Taiwanese and other banks into the mix, in addition to traditional investors from south Asia and the Gulf.
But here it might face some challenges. A banker at a lender that participated in B1/BB- rated borrower’s previous transaction said his firm had since reeled back its exposure to the name. While he did not disclose the reason behind that shift, he added that his firm was anyway unlikely to participate in the new deal as it was not profitable enough.
At 130bp over Libor, the one year loan is paying a margin that is 25bp slimmer than what it offered on its $200m 2013 borrowing. This makes the latest facility Bank of Ceylon’s most narrowly priced deal in over 17 years.
But for some existing lenders, the knife taken to pricing is not a deterrent.
“I think [pricing is] pretty good,” said a banker at a south Asian lender that has a relationship with Bank of Ceylon. “Many banks are interested in good quality [financial institution] credits. Chinese banks, for example are being quite aggressive. The bank is OK as it’s top tier in Sri Lanka.”
While pricing is a point of debate, sources also said some new lenders would not join the transaction owing to a lack of familiarity with the credit.
“We don’t have credit lines for Sri Lanka,” said a Taipei-based loan syndications banker who has received the loan invitation. “It’s going to be hard to convince the head office to establish lines, they’re still developing.”
While Bank of Ceylon may not manage to woo an entirely new syndicate to its fundraising, its credentials will still guarantee sufficient support, said bankers. The borrower has a solid position within the country’s banking system and is wholly owned by the government of Sri Lanka.
In addition to leading its peers in terms of assets, it is also the largest in the country in terms of net loans and deposits, with market shares of 20.6% and 19.3%, respectively, according to a Moody’s report dated September 29.
Come in, we’re open
Invitations for the loan were sent to potential lenders on October 28, offering three levels of participation. Banks can come in as lead arrangers, committing $25m or more for 60bp in fees and an all-in of 190bp. Arrangers committing $15m-$24m net 50bp in flat fees leading to an all-in of 180bp, while senior managers committing $10m-$14m earn 40bp leading to a 170bp all-in.
The all-ins are based on a margin of 130bp. Banks have to submit their commitments by November 27, While the launch size is $100m, there is a greenshoe of the same size.
Emirates NBD Capital was the sole bookrunner of Bank of Ceylon’s last syndication, sealed in July 2013. Axis Bank, Bank of Baroda, Burgan Bank, the Commercial Bank of Qatar, Gulf Bank, Indian Overseas Bank (Singapore), National Bank of Abu Dhabi, Standard Chartered and Union National Bank came into that deal as MLAs, while Doha Bank joined as a lead arranger.
At the arranger level, commitments came in from Askari Bank, First Gulf Bank and Habib Bank, which were joined by Banque de Commerce et de Placements as a lead manager.
Bank of Ceylon will use the latest loan proceeds for general banking requirements and other corporate purposes. Deutsche Bank could not be reached for comment.