Q1 2024 APAC Syndicated Loan Market Overview | Insights | Bloomberg Professional Services

APAC ex-JP

APAC ex-Japan syndicated loans began 2024 with market volume of $88.46 billion in the first quarter, down over a quarter compared to the same period last year. With this loan volume, refinancing, general corporate purposes and investments each accounted for around 20% of the loan purposes, which were the main purposes in 2023.

Notably, despite weak credit supply, Taiwan’s credit market saw a huge increase in demand totaling $10.59 billion, representing volume growth of almost double year-on-year. Amid surging demand, Taiwan’s issuances rose from 8th place in Q4 2023 to 3rd place in Q1 2024. Meanwhile, China remained the dominant contributor to the credit market, accounting for nearly 40% of the regional transaction volume.

The three largest syndicated issuances in APAC ex-Japan this quarter were Guangdong Shenda Intercity Railway Co Ltd for a CNH23.9 billion facility, Isola Castle Ltd for a CNH14.96 billion deal to acquire Vinda International Holdings Ltd and Wuxi Metro Group Co Ltd for a deal worth CNY14.33 billion. Among bookrunners and mandated lead arrangers, Bank of China took the top spot, followed by Bank of Communications and KB Financial Group Inc.

Greater China

Syndicated lending in Greater China declined 42% year-on-year, with total issuance volume of approximately $56 billion in the first quarter of 2024. The Chinese offshore market recorded a 5% higher contribution to the APAC ex-Japan market compared to last year without CNY. Looking at individual markets in Greater China, Hong Kong and China experienced significant emissions declines, falling by 37.30% and 52.89% respectively. On the other hand, Taiwan’s syndicated loan transaction volume increased by 114% year-on-year, which is a record high in the past decade. Due to uncertainty over US interest rate cuts, the US dollar’s cost of capital remained high and so the market turned to other currencies. The Greater China market saw higher issuance volumes in TWD and CNH during the quarter.

As for borrowing industries in Greater China, finance and real estate remained the most active with a market share of 47%, followed by industrials (23%) and materials (9%). The majority of loans made to real estate companies since the first quarter were for refinancing and capital spending, according to Bloomberg data. Due to the ongoing debt crisis in China’s real estate sector and restructuring in the larger market, new lending in the region has taken a more conservative turn.

In Greater China, 37% of syndicated loans were used for capital expenditure, followed by refinancing (21%). M&A activity became active, with transaction volume increasing by 21.28% from Q1 2023 to Q1 2024, contributing to a notable 6% increase in acquisition financing loans. China’s offshore market will have about $2.72 billion in loans coming due this year, accounting for 49% of total loan volume in the first quarter of 2024. This implies a positive outlook for Greater China for potential new transactions, particularly acquisition financing. It is worth noting that China’s National Administration for Financial Regulation (“NAFR”) drafted “Guidelines for Syndicated Loan Transactions” on March 22, 2024 and sought public opinion. The measures aim to improve transparent and fair pricing of syndicated loan transactions in the market, thereby supporting the healthier environment to reduce risks.

ASEAN

Syndicated borrowing among ASEAN borrowers was quiet in the first quarter, similar to the broader APAC region, with Q1 volumes down 38.2% year-on-year to a total of $15.1 billion. The momentum of strong demand from ASEAN borrowers in 2023 did not continue into the first quarter. A staggering 61.4% of the total volume was borrowed for refinancing, while the volume for general corporate purposes and project financing accounted for just 15.6% and 12.7%, respectively. As the global economy closely monitors the Fed’s rate-cutting decisions in 2024, dollar-denominated loans remain at historically low levels at 46.7% of loan volume, compared to the peak of 61.4% in 2021.

The three largest syndicated corporate loans in the region in Q1 2024 were Trafigura Pte Ltd for a $1.90 billion facility, PnB-Kwasa International 2 Ltd for a £1.11 billion facility (1, 42 billion) and Indah Kiat Pulp & Paper Tbk PT for a ₹1.11 billion (US$1.42 billion) facility. Dual Currency Facility equivalent to $1.41 billion. Among the appointed lead-arranging banks, Oversea-Chinese Banking Corp started the year strongly, taking the top spot, closely followed by DBS and SMBC with market shares of 11.18%, 10.88% and 8.85%, respectively. Among bookrunners, SMBC took the top spot, followed by Oversea-Chinese Banking Corp and DBS with market shares of 9.49%, 9.3% and 7.92%, respectively.

IT G

Green and sustainability-related syndicated loans totaled $16.6 billion in the first quarter of this year, down 5% from the first quarter of last year. The Singapore dollar dominated green loan originations, with 33% of green loans in the region issued in SGD, while 38% of sustainability-related loans were issued in Taiwan dollars.

By sector, borrowers in the industrial sector led borrowing activity for green loans, while borrowers in the financial sector led borrowing activity for sustainability-related loans.

Similar to previous quarters, renewable energy projects (44%) saw the most investments from green lending, followed by green buildings and infrastructure projects (28%). The largest green loan of the quarter was made to Polestar Automotive Holding UK for $951 million and will be used for investment and spending in the development and manufacturing of electric and hybrid vehicles.

When it comes to sustainability lending, the dominant KPI in the first quarter continues to be greenhouse gas emissions (23%), followed by gender equality (11%). The largest sustainability-related loan of the quarter was to AUO Corp for TWD40 billion ($1.2 billion), with the borrower receiving a margin reduction on its DJSI World membership, with cancellation tied to the borrower’s ESG ranking from 4 dimensions: environmental, social, governance and economic, overall sustainability assessment. The borrower is expected to receive a margin reduction of 2 to 6 basis points depending on the dimensions achieved with a ranking of 90 or higher.

In the bookrunner and arranger rankings, DBS tops as lead bookrunner and mandated lead arranger for syndicated green loans across APAC, while Taipei Fubon in bookrunning efforts and Mega Financial in mandated lead arranging efforts for sustainability-related loans were leaders across the APAC region.

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