The credit market and its mysteries

The Asian syndicated loan market seems to find more and more hurdles for bankers to overcome.

Now, when a bank wants to market a deal, they usually send an invitation letter to potential lenders. This letter contains the basic information, such as the name of the company, the loan amount, the term and the price. It also contains a brief introduction about the borrower, the purpose of the agreement and the timeline.

If banks are interested, they sign a non-disclosure agreement to receive the term sheet, where the full transaction structure, including covenants and guarantees, will be disclosed.

But this process seems to be getting more and more onerous for those in Hong Kong.

Some of my friends still burning midnight oil (although at home) have told me about recent invitation letters that only contain the name of the company and the size of the transaction. Sometimes even the name of the borrower is not revealed, but replaced with a brief description of the sector in which the company is located and where it is listed, if it is a public company.

By now, many have become accustomed to this swashbuckling situation that is increasingly becoming part of the loan market. They ignore this, sign the NDA and wait for more information.

But the secrecy has now reached a new level. A bank recently sent out an invitation letter revealing only the size of the deal and the potential borrower’s industry. So far everything is normal (if you can call it normal). The guys I spoke to signed the NDA, expecting all the details in return.

But what happened next caught them off guard. The lead bank only returned the name of the borrower, tenor and price details. There was no word on company activities or the timing of the transactions.

Instead, there was a request to sign a second NDA for further information, leaving my friends scratching their heads over the purpose of the two-step NDA process.

My advice for them? As always, when faced with a mind-numbing task, turn it into a drinking game – but have the loan bankers buy the tricks. After all, everything seems better after a few drinks, even NES.

Priscilla C. Carnegie