(Bloomberg) — Asia-Pacific lenders expect syndicated loan volume to rise in 2024, as merger and acquisition activity rebounds and more companies engage in cross-border investments.
There will be more activity on the horizon after a period of lukewarm deal volume, numerous bankers at the recent Global Loan Market Summit in Hong Kong said. The Federal Reserve signaling possible interest-rate cuts later in the year, which would reduce financing costs, will help improve the backdrop. Leveraged loan bankers in particular expect M&A deals financed by new loans to rebound.
The upbeat outlook comes after a 22% decline in APAC ex-Japan leveraged loan volume in 2023 to $23 billion, and syndicated loan volume dropping 3%, according to Bloomberg-compiled league table data. M&A deal volume over the past 12 months has dropped 21%. The downturn has been exacerbated by slumping valuations in China, which deterred private equity firms from offloading their investments.
“There’s so much dry powder that needs to be put to work,” said Andrew Ashman, head of loan syndicate APAC at Barclays Plc and Singapore branch co-chair of the Asia Pacific Loan Market Association, the organizer of the conference. “There will be more extension, repricing opportunities, dividend recap opportunities.”
Bankers said companies looking to invest out of their home markets are starting to boost volume, and they expect to see more cross-border activity ahead.
APLMA Chief Executive James Hogan said there are a lot of onshore Chinese corporates looking for opportunities offshore — and even competing for deals. Banks in Hong Kong and around the region still face challenges managing their balance sheets, as cash-rich companies look to pay down debt, he added.
Ashman also sees more opportunities in the environmental, social and governance space in the current year. Regionally, the places attracting the most interest from loan bankers are India, Southeast Asia and Australia, he added.
“ESG is becoming more important to sponsors,” he said. “We haven’t seen a lot of leverage finance deals structured with ESG metrics, but I’m expecting that to take off going forward.”
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