Far East Horizon Ltd. (3360), the financing unit of state-owned Sinochem Group Co., plans to raise more debt overseas to help fund Chinese high schools and colleges.
The company will sell bonds under its $1 billion medium- term note program and seek new loans offshore to help fund equipment leasing to the education sector, Chief Executive Officer Kong Fanxing said in an interview. Income from education more than doubled in 2011 to $103 million and made up about 14 percent of business at Far East Horizon, China’s largest non- bank financial leasing firm by asset value, he said.
“Diversity in our debt portfolio is key and we aim to always have a mix of onshore and offshore loans and bonds, including some Dim Sum loans,” Kong said, referring to yuan- denominated borrowings in Hong Kong. “Last year we lowered our funding cost by increasing cheaper overseas borrowings.”
A rising middle class in the world’s most populous nation is increasing demand for better quality education. Under a 10- year national education plan through to 2020, China is targeting an increase in the senior high school enrollment rate to 90 percent, and the higher education enrollment rate to 40 percent. Some 6.8 million college students will graduate in China this summer, according to Ministry of Education estimates.
Far East Horizon signed a $200 million facility in May with its first borrowing in Taiwan’s syndicated loan market, according to Kong. “The conclusion of this agreement is a successful case whereby a company affiliated with a Chinese state-owned enterprise has sought syndicated financing from banks in Taiwan,” he said.
That loan pays a margin of 320 basis points more than the London interbank offered rate, according to data compiled by Bloomberg. Far East Horizon agreed to pay 110 percent of the People’s Bank of China rate for a 550 million yuan ($86.6 million) three-year loan signed in March. The PBOC’s best lending rate for one- to three-year money is 6.4 percent.
Far East Horizon plans to issue more bonds this year “at the right time” under its medium-term note program established in April, Kong said. The program is led by Citigroup Inc. and HSBC Holdings Plc, according to an April 5 company statement.
The company will also seek loans in Hong Kong and Taiwan, while considering a debut in the U.S debt markets, he said.
About 16 percent of Far East Horizon’s current financing, excluding a share placement earlier this year, comes from sources offshore, Kong said. The company has the equivalent of $1.24 billion in bonds and loans maturing by the end of 2016, according to data compiled by Bloomberg.
“Our top focus is on Asia,” Kong said. “But the U.S. is one of the biggest capital markets in the world and you can’t escape that.”
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