Worst bond market ever pushes Asian companies to borrow short

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HONG KONG — Asian companies are increasingly resorting to loans, some of which only last a few months, as the worst bond rout makes it harder to access the market for safer long-term finance.

Among companies that had been active issuers of bonds in Asia, the number of applicants for short-term loans this year has increased by 30% to 40%, according to Mr. Christophe Cretot, head of origination and advice in debt, Asia-Pacific at Crédit Agricole Corporate and investment banking. 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 twelve 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 and Chinese miner Tianqi Lithium, according to data compiled by Bloomberg.

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.

Mr Cretot said some Chinese borrowers were moving more permanently from issuing banknotes to obtaining 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.

Property developers Longfor Group Holdings and China Vanke sought Hong Kong dollar-denominated loans, while Agile Group Holdings secured a loan with a 20% interest rate in June and conglomerate Fosun International raised its refinancing agreement at the equivalent of US$875 million (S$1.23 billion).

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.

“Unlike bond issues targeting investors, banks are more likely to accompany customers on rainy days to maintain relationships,” said Natixis senior economist Gary Ng. “For borrowers, it’s about knowing where they can get liquidity in the event of a turn in the money tide, and it’s just easier to borrow from banks. So the switch between bonds and loans will remain and favor the latter in the short term.” BLOOMBERG

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