Asia syndicated loans to rise further in 2011 after 2010 jump

• Preliminary numbers show 2010 volume up 52 pct y/y
• Refinancings and M&A to drive lending in 2011
• Australia and Hong Kong expected to be hot loan markets

By Stephen Aldred

HONG KONG (Reuters) - Syndicated bank lending in the Asia Pacific outside Japan rose 52 percent in 2010, the biggest annual rise in four years, and refinancing is expected to drive volumes higher in 2011, data from Thomson Reuters loans unit Loan Pricing Corp showed on Thursday.

Syndicated loan volumes in the region climbed to $260 billion this year, up from $171 billion in 2009, the preliminary figures showed. Heavy refinancing needs in Hong Kong and Taiwan were the main factors behind the growth.

Bankers anticipate a bumper year in 2011 as deals completed during the lending boom in 2006 become due for refinancing. Australia and Hong Kong are expected to be hot markets for loan refinancings, with M&A lending also picking up around the region.

“It’s not unreasonable to expect 30 to 50 percent growth in Australia,” said John Corrin, ANZ’s global head of loan syndications and chairman of the Asia Pacific Loan Markets Association.

Australian loan volume grew 16.5 percent in 2010 to $62.3 billion. In 2011, the country faces a refinancing wall of $49.3 billion, in addition to any funds needed for mergers and acquisitions activity.

Australia, traditionally the region’s strongest loans market ex-Japan, is still below its 2007 peak of $110 billion. In the two years that followed, international banks withdrew to focus on their home markets and companies avoided booking highly priced loans.

Hong Kong will need to refinance US$29.9 billion of loans, but is coming off the back of a record year when opportunistic blue chips pushed volume to a record US$39.7 billion.

Cashed-Up Corporates

Regional M&A loans surged 153 percent to $24.35 billion in 2010, but are still well below the record of $80.8 billion achieved in 2007.

Bankers expect increased M&A activity in 2011 from Indian and Chinese corporates targeting overseas assets, particularly in mining, oil and gas in Australia, Indonesia and South America, as well as food-related assets in Australia and New Zealand.

The 2011 refinancings present both an opportunity and a challenge, said loans bankers, particularly as pricing continues to decline and euro zone banks in particular feel the pain from increased funding costs brought on by Basel 3 requirements.

China’s banks are also still largely sidelined after their lending surge in 2009.

Banking sources overall remain optimistic that the refinancing targets will be met next year: if borrowers want money, they say, banks will lend, though some loans business may move into the capital markets.

“I expect a positive year, and for reasons other than refinancing as well,” said ANZ’s Corrin, referring to M&A-related funding needs.