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China Development Bank, known for making big loans to Chinese state-owned
companies, is going commercial.
In recent months, state-controlled China
Development Bank has stepped into some of the biggest private deals in Asia,
lending money to e-commerce company Alibaba Group Holding Ltd., Hong Kong
Exchanges & Clearing Ltd. and Indonesia's PT Bumi Resources BUMI.JK -12.16%
.
The bank, which was established in 1994 and has total assets of more
than $980 billion, swooped in to take business away from some of its biggest
global rivals, adding to the competition in Asia, where Chinese banks already
have been stealing business in the lucrative market for initial public
offerings.
China Development Bank is stepping up at a time when some
Western banks, under pressure to strengthen their balance sheets, are cutting
back on lending, especially in long-term loans.
'CDB is trying to become
commercially motivated,' said Mike Werner, senior equity analyst at Sanford C.
Bernstein (Hong Kong) Ltd. 'We have already seen them moving away from its
traditional policy lending to areas such as private equity. It makes sense, as
CDB has cheap funding.'
The lender is one of China's three policy banks
along with Agricultural Development Bank of China and the Export-Import Bank of
China, which typically finance local government infrastructure projects. Neither
of these banks have strayed from their traditional roles.
Alibaba turned
to the bank twice in recent months. In June, Alibaba was seeking a $2 billion
bridge loan from 19 banks, including Australia & New Zealand Banking Group
Ltd., Barclays BARC.LN -1.65% PLC and Natixis SA KN.FR -0.51% to finance the
buyout of its trading unit for $2.3 billion.
Alibaba canceled the bridge
loan and instead borrowed $1 billion from China Development Bank, according to
people familiar with the deal. The banks that offered the original bridge loan,
which was never drawn, received 25% of their original fee.
Then in July,
the bank made a $1 billion four-year loan to Alibaba, in this case to fund the
buyout of up to half of Yahoo Inc.'s 40% stake in the company.
Alibaba
declined to comment. China Development Bank didn't reply to a request for
comment.
While the bank isn't charging lower interest rates than its
competitors, it is willing to offer long-term loans for large amounts, say
bankers. Most commercial banks syndicate loans of more than $1 billion so that
they aren't too heavily exposed to a single client. That is especially true now
with tougher capital restrictions in place. A syndicated loan is offered by a
group of lenders that provide funds to a single borrower.
The bank
doesn't have a large deposit base and instead sells government-backed bonds to
fund its loans. The bank is China's biggest bond issuer after the Ministry of
Finance and is also the biggest issuer in the offshore yuan-denominated bond
market after the Chinese government.
One risk to its efforts could occur
if investors decide its bonds have become riskier. 'If CDB were to turn into a
fully fledged commercial bank, its risk profile would increase and its funding
costs would rise significantly. That would make CDB less profitable overnight,'
Sanford Bernstein's Mr. Werner said.
Hong Kong Exchanges & Clearing
turned to the bank for a $1.8 billion loan recently, which will likely replace
an $860 million bridge loan from Deutsche Bank AG, DBK.XE -2.31% HSBC Holdings
HSBA.LN -1.16% PLC and UBS AG, UBS -0.54% other people familiar with the deal
said. The exchange operator is buying London Metal Exchange for $2.15 billion in
a move that would give the stock-focused exchange instant entry into commodities
trading.
In February, the bank made a $600 million four-year loan to
Indonesia's PT Bumi Resources, charging 6.7 percentage points over the London
interbank offered rate, or Libor The loan enabled the coal producer to refinance
a short-term loan from Barclays, Bank of America Merrill Lynch, and J.P. Morgan
Chase with an interest rate that was six percentage points over
Libor.
China Development Bank is owned by China's Ministry of Finance,
Central Huijin Investment Ltd., which is in turn controlled by Chinese
sovereign-wealth fund China Investment Corp., and the government's social
security fund.
China Development Bank's shift began in 2008 when it was
restructured into a commercial bank. Since then, it has added leasing operations
and a securities unit and opened a Hong Kong branch, its first outside of China.
It also entered into the private-equity business, signing agreements in December
with private-equity firms Permira, Kohlberg Kravis Roberts & Co. and TPG to
seek opportunities for co-investing.
However, the bank is still regarded
as a policy bank and it hasn't sold shares to the public like other big Chinese
lenders. While it has had healthy profit growth, it has lagged behind other
Chinese banks.
A more typical deal is the $10 billion, 10-year loan it
gave to Brazilian state-run oil company Petroleo Brasileiro SA three years ago.
In exchange, Brazil agreed to supply 150,000 barrels a day of crude oil to
China. The bank has financed acquisitions before but by state-owned firms. In
2009, it was instrumental in arranging funding for Aluminum Corp. of China when
it bought a 9% stake in 2009 in Rio Tinto for $14 billion.
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Post By：2012/9/6 12:12:40
