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Last Trade - 13/08/20

Large Cap
Market Cap £7.41bn
Enterprise Value £11.68bn
Revenue £11.41bn
Position in Universe 790th / 6381

Foreign banks step up in Taiwan

Mon 19th March, 2018 1:46am
* Loans: Mizuho expands footprint with acquisition loan for
shoemaker Pou Chen

    By Evelynn Lin
    HONG KONG, March 16 (LPC) - Taiwan’s ultra-competitive loan
market, dominated by highly-liquid domestic lenders, is turning
out to be an unlikely source of opportunities for international
    Mizuho Bank is the coordinator on a NT$28.5bn (US$977m)
acquisition loan for Pou Chen Corp  9904.TW , the world’s
biggest footwear maker, in a rare instance of a Japanese bank
leading a high-profile domestic currency loan in Taiwan. 
    The five-year loan, which will fund Pou Chen’s buyout of
Chinese sportswear retailer Pou Sheng International Holdings
 3813.HK ,  follows a NT$90bn acquisition financing for Advanced
Semiconductor Engineering  2311.TW  also with a foreign bank as
lead – in this case Citigroup.
    “We are seeing more competition from our overseas
counterparts in cross-border acquisition deals as they have
branches in Taiwan and they are more experienced in this field,
and sentiment is quite positive,” said a senior loan manager at
a top-tier Taiwanese state-owned bank.
    On Pou Chen’s loan, two other Japanese mega banks – MUFG and
Sumitomo Mitsui Banking Corp – are also joint mandated lead
arrangers and bookrunners along with Mizuho and Taiwanese
lenders Bank of Taiwan, Bank Sinopac, CTBC Bank and Taipei Fubon
Commercial Bank.
    Mizuho has been a coordinator previously on domestic
currency loans in Taiwan, but has not led an acquisition
financing since 2014, when it coordinated a NT$5.05bn facility
for leasing firm Chailease Finance.

Japanese banks are expanding overseas in search of higher yields
than the ultra-thin returns on offer in Japan.
    Pou Chen’s five-year loan offers an interest margin of 50bp
over Taibor and a top-level upfront fee of 12.5bp. MUFG and SMBC
have also committed to ASE’s loan, which offers an interest
margin of 55bp over Taibor and a top-level fee of 30bp.
    Both loans for Pou Chen and ASE come with pre-tax interest
rate floors of 1.7%, which is a far more lucrative proposition
than most domestic loans in Japan's negative interest rate
    “It makes sense that Japanese banks are eyeing offshore
deals for better returns,” said the senior loan manager.
    It is not just the Japanese lenders increasing their
presence in Taiwan. Around a dozen of the 35 banks committing to
ASE’s giant financing are foreign lenders. 
    NT dollar loans are not known for paying juicy returns,
given the flush liquidity in the banking system in Taiwan.
Still, the blowout response to Pou Chen, with commitments
totalling around NT$200bn, shows the appeal of the borrower's
strong credit profile and the loan's rarity value. 
    Pou Chen makes shoes for international sports brands
including Nike, Adidas, New Balance and Puma.
    Taiwanese lenders also welcome borrowers from the
traditional manufacturing sector as an opportunity to diversify
beyond the semiconductor industry. 
    “We see traditional manufacturing business as more stable
than the semiconductor industry,” said a second loan manager at
a state-owned bank looking to take part in Pou Chen’s financing.
    The loans for Pou Chen and ASE total about US$4.1bn – nearly
half of the US$8.7bn raised from M&A loans in Taiwan in the last
four years. M&A lending peaked at US$5.4bn in 2016. 
    “We are happy to see the increase in M&A and leveraged
buyout transactions that create fresh net loan supply as we face
excessive liquidity,” said a third Taiwan-based senior loan

 (Reporting By Evelynn Lin; Editing by Prakash Chakravarti and
Steve Garton)
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