Rlpc: Taiwan's MOF asks banks for details of Chinese loans

Labixiaoxin Snacks

08/10/2014 16:19

By Carol Zhong 
    LONDON, Oct 8 (Reuters) - Taiwan's Ministry of Finance (MoF) 
has asked eight state-owned banks to provide details of 
outstanding loans to Chinese companies as fears of defaults by 
privately-owned Chinese companies rise, banking sources said on 
Wednesday. 
    The MoF, which is also the biggest shareholder of Taiwan's 
state-owned banks, sent forms to banks on October 3, asking for 
a breakdown of outstanding amounts on syndicated and bilateral 
loans to Chinese companies, the sources said.  
    Taiwan's banks are among Asia's largest lenders of 
syndicated loans and have lent heavily to private and 
state-owned Chinese companies in recent years. 
    The move by Taiwan's MoF follows similar moves by the Hong 
Kong Monetary Authority which stepped up its scrutiny of Hong 
Kong-based banks this year after their exposure to Chinese 
onshore companies soared in 2013.  ID:nL6N0NU5A5      
    Taiwan's MoF also requested information on the terms and 
conditions of security and repayment on the loans, the bankers 
said.    
    "We are afraid there will be a ripple effect of loan 
defaults for Chinese companies. We are even cautious of lending 
to Chinese state-owned companies," a banker with a Taiwanese 
state-owned bank said.  
    The eight government-owned banks that were asked to submit 
information are Bank of Taiwan, Chang Hwa Commercial Bank, First 
Commercial Bank, Hua Nan Commercial Bank, Land Bank of Taiwan, 
Mega International Commercial Bank, Taiwan Business Bank and 
Taiwan Cooperative Bank.  
    The banks were asked to respond by October 7.  
    Some Taiwanese banks said that they have had to postpone 
launching syndicated loans for Chinese borrowers due to fears of 
rising loan defaults. 
    "I'm concerned our head office may step up its scrutiny of 
Chinese companies' borrowings," said a second loan banker at 
another Taiwanese bank. 
     
DETAILS REQUESTED 
    Taiwan's Ministry of Finance specifically asked for details 
of banks' lending to two troubled privately-owned Chinese 
companies - Ultrasonic AG  US5.DE  and Golden Meditech Holdings 
Ltd  0801.HK .  
    A $60 million, three-year unsecured loan for 
Frankfurt-listed shoemaker Ultrasonic was accelerated on 
September 17 after two of the company's executives disappeared 
with the loan proceeds. The creditors agreed to enter into 
further negotiations with Ultrasonic to try to avoid insolvency. 
  
    Nomura co-ordinated Ultrasonic's loan, which was signed in 
early August and Cathay United Bank was the agent.  
    The loan had heavy Taiwanese participation - Chang Hwa 
Commercial Bank Singapore, Taiwan Business Bank Hong Kong and 
Taiwan Cooperative Bank OBU joined the deal as mandated lead 
arrangers. Cosmos Bank Taiwan and Hwatai Bank also participated. 
    Taiwnese banks are now seeking additional protection to keep 
lending to Chinese companies after Ultrasonic's high-profile 
loan default as the risks of lending to mid-sized Chinese 
companies that are being squeezed by the slowdown mount.   
    "A standby letter of credit or other security on loans for 
Chinese privately-owned companies is a must for us in light of 
the Ultrasonic default," a Hong Kong-based senior loan banker 
with a Taiwanese state-owned bank said. 
    Loans for Hong Kong-listed Chinese healthcare company Golden 
Meditech were also in the spotlight in September.  
    Taipei mayoral candidate Sean Lien Sheng-wen, a co-founder 
of hedge fund Evenstar Sub-Fund I which invested in Golden 
Meditech, was alleged to have benefitted from insider trading of 
the company's Taiwan Depositary Receipts (TDR), according to 
local press reports.  
    Golden Meditech signed a Rmb600m ($98 million) three-year 
unsecured bullet term loan in February 2014, which was led by  
Taiwan Cooperative Bank. Eight other Taiwanese banks joined the 
deal.  
    Sinosteel Corp, China's biggest state-owned steel trader, 
also rattled lenders when it told local media that it was facing 
financial problems as a result of unpaid bills from customers. 
The company subsequently denied rumours that it was struggling 
under the weight of overdue loans amounting to Rmb10bn 
(US$1.6bn) in late September.  
    Sinosteel raised a $230 million, three-year loan, which was 
secured on a commercial property in Hong Kong, via agent Bank of 
Taiwan and 11 other banks in February 2014. Eight out of the 12 
lenders were Taiwanese banks. 
    Earlier this year, Hong Kong-listed privately-owned Chinese 
new materials producer, China Lumena New Materials Corp 
 0067.HK , failed to repay an $85 million one-year unsecured 
offshore loan. Seven of the eight banks participating in the 
deal were Taiwanese. 
 
 (Editing by Tessa Walsh and Prakash Chakravarti) 
 ((tessa.walsh@thomsonreuters.com; +44 207 542 4048; Reuters 
Messaging: tessa.walsh.thomsonreuters.com@reuters.net)) 
 
Keywords: LOANS TAIWAN