By: Abdullah Saeed Qureshi
China National Chemical Corp, known as ChemChina launched its $20 billion syndicated loan program that will help in funding the ($43.5 billion) purchase of Syngenta AG (NYSE:SYT), the company said on Friday. HSBC along with China CITIC Bank, Rabobank, Credit Suisse, and UniCredit will organize the financing for the seed-maker.
“The facility will be split between a $15 billion bridge loan and $5 billion to support seed-maker Syngenta’s existing borrowings,” ChemChina said in a press release. In addition, the financing has to be re-paid through a mixture of debt and equity so that Syngenta is able to retain an investment grade rating.
ChemChina gave consent to purchase Syngenta for $43 billion earlier this month in a deal that will change it into the world's biggest supplier of pesticides and agrochemicals. The planned loan program is much bigger than Chinese companies’ prior foreign mergers and acquisitions (M&A) financing, and will likely raise serious concerns over the country’s businesses heaping heavy debt to acquire foreign companies.
Moreover, the planned syndicated loan program will also be the largest ever in the world this year. Before this, Shire Plc raised $18 billion funding, according to Bloomberg. Last year, the German car maker Volkswagen signed a $22 billion syndicated loan pact.
This month, ChemChina also pursued a 625 million-euro loan, to help its acquisition of KraussMaffei Group, a leading German machine maker. It also raised loan worth €6.8 billion in 2015, in order to acquire Pirelli &C.SpA – a leading Italian car maker.
According to the official statement” “the financing has been launched to a select group of existing lenders to Syngenta and ChemChina. Lenders are being asked to commit US$1.25 billion each to the financing.” Moreover, the deal is expected to be completed by April, 2016.
Analysts believe that if ChemChina successfully acquires Syngenta, it could re-shape the Chinese biotech industry.
Originally Published: China Business News