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Asian lenders are becoming more active in the region’s project finance loan market as European banks retreat, according to Sumitomo Mitsui Banking Corp. and Southeast Asia’s largest bank, DBS Group Holdings Ltd. (DBS)
European lenders’ share of the Asia-Pacific loans market fell to 10.8 percent this year from 16.2 percent in 2011, according to data compiled by Bloomberg. BNP Paribas SA’s share dropped to 0.4 percent from 1.1 percent while Credit Agricole SA (ACA) has gone from being the no. 22 ranked arranger to the 50th. Project finance loans fell 50 percent to $17.2 billion since Dec. 31 compared with the same period of 2011, the lowest since 2009, the data show.
“The French banks have been noticeably absent from the market leaving it to the Japanese banks and a handful of others to provide the necessary liquidity,” Mark Giblett, SMBC’s group head of project finance for Asia, said in a phone interview from Singapore. “For jumbo project finance deals this lack of liquidity will be an issue.”
Singapore Power Ltd. hired Bank of Tokyo-Mitsubishi UFJ Ltd., DBS, Mizuho Corporate Bank Ltd., Oversea-Chinese Banking Corp., SMBC and United Overseas Bank Ltd. (UOB) to help arrange a S$1.5 billion ($1.2 billion) 10-year project finance deal, three people familiar with the matter said yesterday. The facility will be this year’s third-biggest after PT Krakatau Posco’s $1.73 billion loan, which included a $1.2 billion tranche from Export-Import Bank of Korea, the data show.
The year’s second-biggest project finance facility is a $1.35 billion-equivalent deal for Youngchun-Sangju Highway Co.
“Funding from export credit agencies is becoming even more important to close off any possible financing gaps,” said Giblett, ahead of today’s Asia-Pacific Loan Market Association project finance seminar in Singapore. Export-Import Bank of Korea and Japan Bank for International Cooperation are among lenders increasing their activities, he said.
Loan volumes are low this year due in part to the lack of deals from developed economies, which take a shorter amount of time to complete, according to Lim Wee Seng, managing director of energy, chemical and infrastructure project finance at DBS.
“The pipeline has been a bit slow because we’re still cultivating opportunities in Malaysia, Indonesia and Vietnam,” Lim said, noting that regional banks are increasingly “stepping in to fill the funding gap.”
Europe’s sovereign debt crisis has also unnerved borrowers in the region, said Anita George, the chief investment officer of International Finance Corp., the World Bank division that lends to companies in emerging markets.
“There’s lower demand for major projects in Asia as companies adopt a wait-and-see approach due to the uncertainty,” George, who is today’s keynote speaker, said in a phone interview ahead of the seminar. “Even though the financial crisis is mostly in Europe and the West it’s had an impact here because a lot of European banks which were lending in this space have disappeared.”
To contact the reporter on this story: Katrina Nicholas in Singapore at firstname.lastname@example.org
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