INSUBCONTINENT EXCLUSIVE:
A surging dollar is fueling bets that developing nations may also raise rates faster than anticipated
The
in the offshore syndicated loans market may soon be over, as foreign banks pinched by their own rising borrowing costs balk at the lowest
lending rates in a decade."India may be approaching a turning point for loan pricing to come up a bit to facilitate syndication," said
Samuel Tan, co-head of loan syndication and distribution for United Overseas Bank in Singapore.As the Federal Reserve gears up for more
interest-rate hikes, a surging dollar is also fueling bets that developing nations may also raise rates faster than anticipated
That's all pressuring some global banks' cost of funding
As a consequence, there are signs that foreign lenders are growing more selective with Indian loans, even as they cheer signs that the
nation is moving toward cleaning up about $210 billion of non-performing assets.In another sign of weakening demand from global banks, more
Indian companies have been forced to rely on a smaller group of lenders to underwrite borrowings or to use their relationships to strike
so-called club deals.Companies may get cheaper borrowing costs through the club arrangements
But doing so makes them reliant on a smaller group of banks, creating the risk that any shift in those lenders' willingness to extend funds
could hamstring the firms.Indian Railway Finance Corp
hired lenders to arrange loan facilities, more than two months back, but is yet to start marketing to a wider group of banks in syndication
IndusInd Bank's $500 million loan led by six mandated lead arranging banks, or MLABs, and signed in April, only drew three banks in
The $249 million loan for Great Eastern Shipping Co
unit, Greatship India, attracted two participating lenders which took over half of the allocation
Birla Carbon, a holding company of conglomerate Aditya Birla Group, opted to only seek lenders at top-ticket levels, rather than seeking a
Hindustan Petroleum Corp., which mandated a $300 million 3Y facility earlier this year, has decided against marketing the loan in general
syndication, according to people familiar with the matter, who are not authorized to speak publicly and asked not to be identified.The
ability for lead banks to sell down Indian loans is decreasing due to low interest margins, according to Sandeep Bhatt, Mumbai-based senior
regional manager for India at Export Development Canada."In some cases, bankers are asking borrowers to bring their relationship banks as
lenders to overcome this problem," Bhatt said
"Pricing for large corporates is not expected to go down below current levels for the next six months."(Except for the headline, this story
has not been edited by TheIndianSubcontinent staff and is published from a syndicated feed.)
