Gunvor tests commodity loan offer

* Loans: higher margin reflects growing unease among lenders with the industry

HONG KONG, May 22 (LPC) – Gunvor Group offers a 20bp higher margin on its latest syndicated loan targeted at Asia, in the first test of new price levels for the commodities sector since the outbreak of coronavirus.

The Southeast Asia unit of Swiss trader Gunvor Singapore initiated a one-year US $ 500 million refinance with an aggregate price of 190bp at the highest level based on a margin of 115bp interest against Libor.

These prices are respectively 20 and 15 bps richer than the margins of a one-year US $ 455 million contract signed by the borrower in June 2019. Gunvor’s funding in 2019 attracted 22 lenders, including six arrangers. main. In contrast, this year’s deal is self-arranged.

“Prices need to be changed to reflect the rising costs of funding for most banks,” said a Singapore-based loan syndication banker. “The amount of the increase will be the most intensely negotiated.”

Gunvor is typically the first of several commodities traders who tap into the syndicated loan markets in Asia (excluding Japan) each year, and the response to its latest deal will be closely watched by further commodity credits expected to fall to the second. semester of the year.

Between August and October of last year, the Asian subsidiaries of Louis Dreyfus, Mercuria Energy Trading and Trafigura Group, as well as Olam International, concluded loans totaling $ 4.88 billion.

Louis Dreyfus is expected soon because he has a revolving credit facility of US $ 500 million over three years maturing in September. The Asian arm of the commodities trader, headquartered in the Netherlands, sought a new loan from banks in April, but suspended it pending the close of a separate loan in the United States first, banking sources said.

PANDEMIC AFFAIRS

The raw materials sector has been hit hard by the coronavirus pandemic, with falling prices putting many companies in financial difficulty.

Singapore-based Hin Leong Trading was placed under a court-appointed supervisor in April with debts of more than US $ 3 billion, after being caught up by falling demand for oil and n failed to secure new lines of credit. He also admitted to hiding $ 800 million in term losses over several years and said he had already sold a large chunk of his inventory, court documents show, leaving his 23 lenders at risk of heavy losses.

Small commodity players are already facing tensions and risk being deprived of essential financing. Earlier in May, HSBC filed a lawsuit to put Singaporean oil trader Zenrock Commodities Trading into receivership for non-payment of dues and other issues.

In March, Hontop Energy, an oil trader linked to a Chinese refiner, was placed in receivership, blaming demand for craters due to Covid-19. That same month, the Singapore High Court dismissed a request by commodity trader Agritrade International for a moratorium on the US $ 1.55 billion debt owed to dozens of creditors, including US $ 983 million. US owed to secured lenders. At least 20 banks are suffering losses from the collapse of Agritrade.

“It’s a bad time for commodities companies to refinance due to the impact of Covid-19 and the Hin Leong default,” said a second Singapore-based loan banker. “Banks are more cautious now and borrowers have postponed transactions for these reasons.”

FLIGHT TOWARDS QUALITY

As the commodities sector continues to experience price volatility, not all commodity traders should have a hard time with their fundraising plans.

Bankers believe the biggest and strongest players, including Swiss companies Mercuria and Trafigura and Singapore-based agribusiness Olam, would be able to navigate turbulent markets.

“I think the crisis is mainly affecting small Asian trading houses,” said a Singapore-based relationship manager at a Chinese bank. “International banks will continue to support the world’s largest trading houses, although participation will be limited to the amount of the refinancing and not to the additional amounts.”

Singapore-based leading credit banker said, “There will be a flight to quality. Leading companies with transparency over their structured trade finance will survive. Those who are less open or smaller will suffer.

Others believe that the membership of the lenders’ union will also shrink.

“A syndicate of 30 banks for major commodity names is a thing of the past,” said another Hong Kong-based senior credit banker. “Small banks that were previously involved in commodity transactions are unlikely to be listed this time around. “

Given the issues facing the industry and the risk aversion of lenders, syndicated loans for commodity credits could be hit this year, exacerbating last year’s slowdown when these loans raised 15.41 billion dollars in Asia (excluding Japan), according to Refinitiv LPC. The data.

The 2019 tally of commodities syndicated loans in the region was 4.17% lower than the US $ 16.08 billion raised in 2018 and far from the 2014 US $ 29.33 billion, which was a record high since 2009.


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