Asian firms seek short-term loans amid this year’s bond rout

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(Bloomberg) — Asian companies are increasingly resorting to loans, some of which only last a few months, as a record bond rout this year makes it harder to access the market for safer, longer-term funding.

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Among companies that had been active issuers of bonds in Asia, the number of applicants for short-term loans this year has increased by around 30% to 40%, according to Christophe Cretot, head of origination and advice in debt, Asia-Pacific at Crédit Agricole SA. This range is based on loans arranged by the bank in the region.

“We have seen this in markets such as Singapore, Indonesia and China, where issuers with bonds maturing in the next three to six months are looking for nine to 12 month facilities to buy some time before to broadcast again,” he said. Among those getting loans for up to one year in 2022 are Indonesian energy company Pertamina Persero PT and Chinese miner Tianqi Lithium Corp., according to data compiled by Bloomberg.

Domestic business lending activity was strong in parts of Asia. Loans to domestic industries in South Korea jumped 15.9% from a year earlier in the second quarter, the biggest increase in a series of Bank of Korea data from 2008. The growth rate lending to India’s commercial sector hit its highest since 2013, according to data from the Reserve Bank of India.

Meanwhile, global bonds fell in their first bear market in a generation, ending a four-decade bull run as central banks tighten policy to fight inflation, and Asia is no exception. . But what sets the region apart is that on top of these broader risks, the Asian credit market is also grappling with a housing debt crisis in China that has effectively prevented many developers from selling bonds in dollars.

Cretot said some Chinese borrowers were moving more permanently from issuing banknotes to getting bank loans as bond sales fell due to record defaults.

Builders have been among those that have turned to bank facilities without selling offshore notes this year. Quality developers Longfor Group Holdings Ltd. and China Vanke Co. sought Hong Kong dollar-denominated loans, while Agile Group Holdings Ltd. obtained a loan with an interest rate of 20% in June and that the conglomerate Fosun International Ltd. increased its refinancing agreement to the equivalent of $875 million.

Public data on short-term loans is not readily available as it is mostly done on a bilateral basis. But Hong Kong-based bank arrangers, asking not to be identified as they are not authorized to speak publicly, said more Asian borrowers are turning to such facilities as they face maturities of debt amid difficulties selling new bonds. Some also want to avoid the lengthy approval process typical of longer loans beyond three years.

Although Asia joined a global rally in bond sales on Tuesday, the region’s dollar note issuance this year has been lackluster overall.

“Unlike bond issues targeting investors, banks are more likely to support customers on tough days to nurture relationships,” said Natixis SA senior economist Gary Ng. “For borrowers, it’s all about where they can get liquidity under the turning of the money tide, and it’s just easier to borrow from banks. As such, the switch between bonds and loans will remain and favor these in the short term.

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