loan syndications: a market overview and ebrd updateebrd region loan markets ebrd’s syndication...
TRANSCRIPT
Loan Syndications
A market overview and EBRD update
16th Annual Syndications and Co-financiers Meeting
18th March 2014
Agenda
Global loan markets
EBRD region loan markets
EBRD’s syndication activity
Mood snapshot … before
“Banks are trying anything to get deals on their
books … undercutting to prices that look
absolutely ridiculous if you take an objective
view” • Banker quoted in Euroweek, 1st November 2013
“EM loans bankers fear that the latest match in
pricing is just a brief crossover point and that
prices in CEEMEA, especially Russia, have
much further to fall” • Euroweek, 1st November 2013
3
Mood snapshot … after
“Loans worth USD 8 billion being sought by
Russian companies from international banks are
in danger of falling through because of the crisis
in Ukraine” • Moscow Times, 6th March 2014
“Falling growth, not Ukraine fallout, is biggest
threat to CEEMEA [debt] supply” • Global Capital, 28th February 2014
4
Debt flows to EMs, net
-100
0
100
200
300
400
500
2006 2007 2008 2009 2010 2011 2012 2013e 2014f 2015f
Commercial banks Non-banks Official flows
5 Source: Institute of International Finance
Sources of financing, 2007-2013
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2007 2008 2009 2010 2011 2012 2013
Loans DCM ECM
6 Source: Dealogic
Loan trends in 2013 - global
Global syndicated loan volume up 24% to USD 4.3 tn • Highest volume since 2007 (USD 4.9 tn)
• Number of deals up 7% to 9,400
• Share of non-IG up from 40% to 44%
Average pricing for IG corporates down from 197 bp to
141 bp
Average pricing for non-IG corporates down from 361
bp to 346 bp
Loans accounted for 55% of total corporate financing
Tenors are lengthening: nearly 50% of volume in 3-5
year bracket (45% in 2012)
7
Global syndicated loan volume by region, USD bn
0
500
1000
1500
2000
2500
3000
3500
4000
4500
5000
2008 2009 2010 2011 2012 2013
Americas Asia Pacific EMEA
Source: Dealogic
Global average IG/sub-IG corporate loan
pricing, 2008-2013
0.0
50.0
100.0
150.0
200.0
250.0
300.0
350.0
400.0
450.0
199 bp
spread 220 bp
spread
9 Source: Dealogic
IG corporate loan pricing and tenors
2009-2013 (averages)
2.00
2.50
3.00
3.50
4.00
4.50
100.00
120.00
140.00
160.00
180.00
200.00
220.00
2009 1H 2009 2H 2010 1H 2010 2H 2011 1H 2011 2H 2012 1H 2012 2H 2013 1H 2013 2H
10
Ave
rag
e p
ricin
g b
ppa (
red
lin
e)
Ave
rag
e te
no
r (blu
e lin
e) Pricing tightens
and tenors
lengthen
Source: Dealogic
EM banks’ share in EM syndicated loans
Source: Dealogic
0%
10%
20%
30%
40%
50%
60%
70%
2007 2008 2009 2010 2011 2012 2013
EM banks DM banks
Agenda
Global loan markets
EBRD region loan markets
EBRD’s syndication activity
Emerging Europe: Foreign private capital flows, net
-50
0
50
100
150
200
250
300
2011 2012 2013e 2014f 2015f
Non-banks Commercial banks Direct investment Portfolio investment
13 Source: Institute of International Finance
Loan volumes in EBRD region
0
20
40
60
80
100
120
140
160
180
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
Russia Turkey Other
US
D b
n
14 Source: Dealogic
Pricing trends – two illustrations*
0
50
100
150
200
250
300
2005 2006 2007 2008 2009 2010 2011 2012 2013
Rosneft 5-yr loans Sberbank 3-yr loans
15
* Spread only, without fees
Source: Dealogic
Good indicator
for trend of blue
chip pricing
Who can borrow? – an illustration Russian borrowers 2012-2013
Other
25%
Rosneft
51%
SeverEnergia
4%
Gazprom
3%
VTB Group
3%
Norilsk Nickel
3%
ChTPZ
3%
Novatek
3%
Megafon
3%
Sberbank
2%
Source: Dealogic
All Russian borrowers by %, 2012-2013 ytd:
concentrated at the top of the credit curve
75% captured by 9 names and 4 sectors
Russian market – some observations
Russia syndicated loan volume: • 1% of global volume
USA syndicated loan volume: • 50% of global volume
Russia syndicated loan volume: • 2% of GDP
USA syndicated loan volume: • 13% of GDP
There is no Russian domestic loan market, and this needs to
develop before real depth and reach can grow
“If you look at the size of the Russian market, there really should
be 50 names borrowing through loans rather than the few there
are” • Ashu Khullar, Co-Head EMEA Loan Structuring and Syndications, Citibank
(Global Capital, 10th January 2014)
17
World Bank Doing Business Report 2013
18
Country Ranking/189
Singapore 1
USA 4
Denmark 5
Georgia 8
Armenia 37
Poland 45
Kazakhstan 50
Tunisia 51
Bulgaria 58
Azerbaijan 70
Mongolia 76
Russia 92
Serbia 93
China 96
Ukraine 112
Egypt 128
Chad 189
Country Ranking/186
UK 1
USA 3
Poland 3
Georgia 3
Romania 13
Ukraine 13
Bulgaria 28
Armenia 42
Serbia 42
Azerbaijan 55
Mongolia 55
China 73
Kazakhstan 86
Turkey 86
Egypt 86
Russia 109
Libya 186
Ease of doing business Ease of obtaining credit
EM banks’ share in syndicated loans
to EBRD region
Source: Dealogic
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2007 2008 2009 2010 2011 2012 2013
EM banks DM banks
Number of lenders into EBRD region,
2005-2013
Source: Dealogic
0
50
100
150
200
250
300
350
2005 2006 2007 2008 2009 2010 2011 2012 2013
330 at
peak 233 in
2013
Agenda
Global loan markets
EBRD region loan markets
EBRD’s syndication activity
2013 Annual Mobilised Investments: sector breakdown
Source: EBRD
Agribusiness 11% Financial Institutions
1%
Manufacturing & Services
29%
Municipal Environmental Infrastructure
3% Natural Resources
13%
Power & Energy 23%
Property & Tourism 4%
Telecoms 16%
2013 Annual Mobilised Investments: country breakdown
Source: EBRD
Bulgaria 2%
Croatia 2%
Kazakhstan 1%
Kyrgyzstan 1%
Mongolia 8%
Poland 10%
Regional 21%
Romania 20%
Russia 22%
Turkey 5%
Ukraine 8%
Non-Russian B loans in 2013
Mongolyn Alt Corporation, Mongolia
• USD 350 mm, of which USD 60 mm B loan and
USD 50 mm DEG
• 7 years at 425 bp spread
Cosmote Romania
• € 225 mm A/B loan, of which € 150 mm B loan
• 5 years at 525 bp spread
Multi Veste Ukraine 3
• € 46 mm A/B loan, of which € 30 mm B loan
• 11 years (25% balloon) at 700 bp spread with grid
CAEPCO, Kazakhstan
• USD 18 mm A/B loan, of which USD 10 mm B loan
• 12 years at 375 bp spread
Energa, Poland
• PLN 800 mm, of which PLN 400 syndicated
• 12 years at 125 bp spread
Dräxlmaier, regional (Romania, Macedonia, Moldova,
Serbia, Tunisia)
• € 65mm A/B loan, of which € 15 mm B loan and €
35mm KfW Ipex
• 7/5 years at 260/250 bp spread with grid
Expur Romania
• € 80 mm A/B loan, of which € 40 mm B loan, in €
and RON
• 5 years at 240 bp spread with grid
Aluflex, Croatia
• € 20 mm A/B loan, of which € 10 mm B loan
• 7 years (sculpted) at 450 bp spread
Sutas, Turkey
• € 50 mm A/B loan, of which € 25 mm B loan
• 5 years at 260 bp spread
Türk Traktör, Turkey
• € 75 mm A/B loan, of which € 45 mm B loan
• 5 years at 220 bp spread
Galnaftogas, Ukraine
• USD 80 mm A/B loan, of which USD 60 mm B loan
• 7/5 years at 550/500 bp spread
Kompanion Microfinance, Kyrgyzstan
• USD 12 mm A/B loan, of which USD 8 mm B loan
• 3 years at 480 bp spread
24
Russian B loans in 2013
Inter Rao, Russia
• RUB 10 bn A/B loan, of which RUB 5 bn B
loan
• 7years at 185 bp spread
Gestamp, Regional
• € 100 mm A/B loan, of which € 40 mm B
loan
• 7/5 years at 405/375 bp spread
Faurecia, regional, thereof 37% Russia
• € 122.5 mm A/B loan, of which € 82.5 mm
B loan
• 6.5/4.5 years A/B Loan 425/400 bp spread
Kronospan Bashkortostan, Russia
• € 90 mm A/B loan, of which € 45 mm B loan
• 8/6 years at 320/290 bp spread with grid
Rushydro sell-down (signed 2006)
• RUB 350 mm sell down of A loan to an
existing participant
• 7 year (remaining) at 365 bp
Hyperglobus, Russia
• RUB 4 bn A/B loan, of which RUB 2 bn B
loan
• 10 years at 240 bp spread
Golden Ring Centre sell-down (signed 2012)
• USD 10 mm sell down of A loan
• 9 year (remaining), 35% balloon at 600 bp
25
Agenda
Global loan markets
EBRD region loan markets
EBRD’s syndication activity
Wrapping up…
Russia – top 10 syndicated loan providers 2013 (and EBRD Russia volume 2013, inc. equity)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
27
US
D b
illio
n
Majority of EBRD
volume at 5
years or longer
Russia – top 10 syndicated loan providers 2013 (and EBRD Russia volume 2013, inc. equity)
0
0.2
0.4
0.6
0.8
1
1.2
1.4
1.6
1.8
2
28
US
D b
illio
n
Majority of EBRD
volume at 5
years or longer
Excluding Rosneft’s
$14.2bn (20% 5y,
rest 2y funds)
The EBRD co-financing rationale
Strong EBRD B loan portfolio performance
Total B loans committed = € 12.6 billion
Gross write-offs/total B loans committed • 0.32% cumulative
Net write-offs/total B loans (after recoveries/write-backs) • 0.28% cumulative
29
Key assumptions:
1. Commercial bank writes off the same percentage of its B loan as EBRD writes off on its A loan.
2. Currencies vary, and thus precise percentages may vary.
3. Information and data as of end-December 2013
Who will lend in the next decade?
The last decade was marked by feast and famine • 2002-2007: growing liquidity
• 2007-2013: crisis years
The challenge in the next decade will be to intermediate non-
traditional sources of capital
Banks have been logical providers of capital in the past, and will
continue to be – but the scale and manner will change • Banks have credit analysis skills and are best placed to book and monitor loans
• But banks are now becoming “originators to distribute” more than in the past
• Most non-traditional sources of capital do not (yet) have the resources for credit
analysis of typical sub-IG unrated loan assets
• Marrying the non-traditional sources with sub-IG unrated loans will be the key
challenge – the rewards for innovation in this space will be huge
30
Agenda
Global loan markets
EBRD region loan markets
EBRD’s syndication activity
Thank you for your attention!
18th March 2014
Lorenz Jorgensen
Tel: +44 20 7338 6902
Email: [email protected]