Thailand’s biggest loan takes shape

* Loans: Three guarantee CP Group’s $10.6 billion purchase of Tesco Asia

MUMBAI/HONG KONG, March 13 (LPC) — Three banks are providing a bridge loan of around $7.5 billion to Thai billionaire Dhanin Chearavanont’s Charoen Pokphand Group after it won the battle for Tesco’s Asian business with a offer of $10.6 billion.

JP Morgan, Siam Commercial Bank and UBS are underwriting the loan, which has a tenor of 12 to 18 months and will be launched to a select group of banks in senior syndication this week.

Early indications point to strong interest from other lenders, including a major group of banks which provided a US$10-11 billion bridge loan to back an unsuccessful bid by the beer tycoon’s TCC Group Charoen Sirivadhanabhakdi.

This is despite the rich valuation of around 12.5 times core earnings of the target business, which puts the bridge loan at around 8.84 times earnings.

“It’s a pity that our horse lost the race. However, it’s not the end of the world. We will be keen to loan out to the successful bidder as we have already done quite a bit of preparatory work and would not want this to be wasted,” said a senior banker working on a competing bid.

Dhanin’s CP Group edged out competing bids from Chirathivat Family Core Group – Thailand’s largest retailer by market capitalization – and Charoen’s retail unit Berli Jucker.

The bridge loan for Dhanin’s CP Group will set a record in Thailand, surpassing Berli Jucker’s $6.2 billion equivalent financing for its purchase of Big C hypermarkets in March 2016.

“It will be good to get involved in the CP Group loan because we don’t often get such giant deals in Thailand,” said a banker distant from the deal.

FAMILY NAME

Lenders are also keen to participate given CP Group’s profile and track record. Dhanin’s flagship operates 12,000 7-Eleven convenience stores through CP All and approximately 80 cash-to-go stores through Siam Makro.

CP Group will take control of 1,965 stores that Tesco operates in Thailand – many of which were sold to the British company during the 1997-98 Asian financial crisis – including 200 Tesco Lotus hypermarkets and 1,600 Tesco Lotus Express convenience stores, as well as 74 outlets in Malaysia.

Over the years, Dhanin’s significant acquisitions have provided some multi-billion dollar funding opportunities for Asian lenders. CP All’s purchase of wholesaler Siam Makro in June 2013 was accompanied by a $5.88 billion 12-month bridge loan, which was then refinanced with a term loan of just over $4 billion in January 2014. Earlier in 2013, UBS provided a $5.5 billion loan. five-year loan that replaced a bridge backed by CP Group’s acquisition of HSBC’s 15.6% stake in Ping An Insurance Group Co of China.

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