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Saturday, 18 November 2017

Asia-Pacific Loan House: Deutsche Bank

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Hungry for more

Slowing economic growth dampened activity in the Asian loan markets, but one bank distinguished itself with a focus on event-driven financings and successful distribution. For its bold calls and targeted strategy, Deutsche Bank is IFR’s Asia-Pacific Loan House of the Year.

Despite distractions at head office and a slowing Asian market, Deutsche Bank stuck to its guns in Asian loans in 2015, relying on its risk judgement and distribution skills to chalk up numerous sole mandates while maintaining a healthy return on risk-weighted assets.

Deutsche did not have things all its own way in 2015, with a management reshuffle back in Germany and painful group writedowns raising plenty of questions over its risk appetite.

The German lender also faced a tough operating environment in Asia, as China’s slowing economy took its toll on the rest of the region.

With every major loan market in Asia off the boil, the lacklustre deal flow and increased competition among market participants led to significant pricing compression.

Deutsche, however, distinguished itself during the review period, providing creative financing solutions for a variety of Asian borrowers and targeting event-driven situations and sole mandates to enhance its returns.

“The Deutsche Bank Asian loans business has continued to grow its market and wallet share in 2015, building further on a model that focuses on borrowers and investor-clients while leveraging our market-leading structuring and distribution capabilities to generate a strong return on capital,” said Amit Khattar, head of Asia loan trading and syndication and co-head of Asian loan capital markets.

The German lender underlined its commitment to the Asian market with a successful bid for a near-US$1.1bn loan portfolio from British bank RBS, in a deal that offers the opportunity to cement its relationships with top-tier Asian borrowers and generate additional interest income from loans paying higher margins than the current prevailing rates.

The highlight of Deutsche’s year in primary syndications was the €500m (US$556m) seven-year acquisition-related loan for Malaysia Airports Holdings in March. The bank was one of three bookrunners on a hugely successful deal that came with a unique toggle feature allowing MAHB to decide between a partial or full guarantee, as well as a rare reverse flex.

Deutsche also impressed with its leading roles on deals for Canada’s Brookfield Asset Management, which borrowed A$1.9bn for its proposed purchase of Australian infrastructure firm Asciano and a further US$557m in a uniquely structured financing for its maiden property acquisition in India.

The bank was active in Japan, too. In February it provided a US$170m bridge to Japanese pachinko manufacturer Universal Entertainment Corp to finance the construction of a casino in the Philippines and a few months later arranged a US$600m five-year private placement that refinanced the loan.

Going solo

Leveraged financings, which fall under head of high-yield and leveraged DCM, Asia, Deepak Dangayach, also marked a key feature in Deutsche’s deal list as it pursued opportunities to make better returns.

High-profile transactions included its sole underwrite in July of the A$290m senior and mezzanine loan backing Australia’s Quadrant Private Equity’s buyout of VIP Petfoods, the NZ$310m five-year loan to fund Pacific Equity Partners’ buyout of Auckland-based Academic Colleges, the US$145m buyout loan for Blackstone’s acquisition of the Indian operations of British outsourcing firm Serco, and the US$100m three-year bullet term loan backing private equity firm KKR’s purchase of a nearly 40% stake in unlisted Indian company Gland Pharma.

Deutsche also bagged a sole mandate on the cross-border €190m non-recourse loan for Thai petrochemical giant PTT Global Chemical’s loss-making French subsidiary Vencorex Holding.

The lender showed its prowess notching up sole mandates from other credits, including first-time borrowers such as China’s Dalian Wanda Commercial Properties, which raised US$500m in May, and the standby letter of credit-backed US$200m financing for Vietnam Investments Group – the country’s first such loan – in June.

While rivals turned cautious on private-sector risk, Deutsche thrived in bringing private-sector borrowers to the market – not an easy task, especially in China. Ping An International Leasing’s US$300m dual-tranche debut offshore loan was tripled from US$100m after a strong response in syndication, led by head of syndicate Birendra Baid. A US$150m acquisition loan for Chinese hospital operator Phoenix Healthcare Group and a US$330m loan for palm plantation company Royal Industries Indonesia were among other examples.

It also helped distribute structured loans for challenging credits such as national carrier Air India and Indian textile manufacturer Alok Industries.

Rounding out Deutsche’s loan business were a clutch of deals for top-tier relationship clients such as Australian carrier Qantas and property company Frasers Australand; Indian borrowers Hindustan Petroleum Corp and Tata Steel; and Philippine lenders BDO Unibank and Rizal Commercial Banking Corp.

To see the digital version of the IFR Review of the Year, please click here .

To purchase printed copies or a PDF of this report, please email gloria.balbastro@tr.com .

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