Chinese Firms Seek Bridge Loans to Ease Bond Repayment Pressure

(Bloomberg) -- Some of China’s state-owned and large private firms are in preliminary talks with banks to use bridge loans to refinance bonds under imminent repayment pressure, according to loan arrangers at four banks.

The discussions about the popular form of interim financing have emerged as these relatively strong borrowers seek to wait out the volatility in the bond market induced by the coronavirus outbreak, said the loan arrangers who asked not to be named as the information is private.

The bankers said the number of deals they had under consideration ranged from fewer than five to as many as 30. They didn’t disclose the borrowers, meaning some may overlap.

The companies, many of which either have or are the equivalent of an “investment grade” credit rating, may consider sales of long-term notes when the market impact of the epidemic starts fading, they added.

Echoing fears on Wall Street, mounting concern about the global impact of the coronavirus has sparked the worst weekly selloff of Asian dollar bonds this week in more than five years.

One of the borrowers keen on a bridge loan is Shanghai Electric Group Co., which is sounding out banks’ interest in a potential deal of about 600 million euros to refinance a 5-year bond of the same size due in May. The company has mainly used the bond to repay a 400 million-euro bridge loan that backed its acquisition in 2015 of a 40% stake in Ansaldo Energia SpA, an Italian power generation equipment maker.

Some other Chinese companies also have expressed similar interest.

“We have to wait and see if these deals will materialize as the bond market remains pretty open and strong,” said John Corrin, global head of loan syndications at Australia & New Zealand Bank.

Uncertainties about the outlook of the global health crisis has also unleashed a flurry of issuance of short-dated bonds, typically with a maturity of less than a year, by Chinese companies in recent weeks. High-quality issuers intend to use such debt, which doesn’t need Beijing’s regulatory approval, to help repay soon-to-mature bonds.

--With assistance from Lin Zhu.

To contact the reporters on this story: Apple Lam in Hong Kong at alam271@bloomberg.net;Annie Lee in Hong Kong at olee42@bloomberg.net

To contact the editors responsible for this story: Shen Hong at hshen87@bloomberg.net, Chan Tien Hin

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