Malaysia’s state-owned pension fund is emerging as an unlikely driver of offshore financing opportunities for Asian lenders, as it continues its overseas acquisitions.
The Employees Provident Fund was back in the syndicated loan market last week after reaching agreement on its latest purchase, that of a UK hospital portfolio. The fund is acquiring 12 acute-care hospitals from the UK’s second-largest hospital-care provider, Spire, for £750m (US$1.14bn).
The purchase was made together with hedge funds Och-Ziff and Moore Park Capital Partners. EPF is the majority shareholder in the consortium.
For its purchase of the Spire group of hospitals, EPF and members of its consortium are seeking a £405m five-year term loan, and a group of Asian lenders are leading the deal.
According to sources, Standard Chartered, OCBC Bank and UOB are the mandated lead arrangers and bookrunners and have underwritten the amortising loan. The loan takes out a six-month bridge loan that was in place for the purchase.
The loan is secured against legal mortgage, cash flow and assignment of rentals from the hospitals. The deal also enjoyed “a strong level of sponsor support”, the sources said.
So far, the deal has received £75m in commitments. A couple more banks are processing credit approvals.
After the acquisition, the Spire management would continue to manage the hospitals, ensuring business continuity, sources said. Spire is the second-largest provider of acute healthcare in the UK and has a 15% market share.
Shopping spree
The latest deal adds to a UK shopping spree for EPF, which has been snapping up commercial properties at prime locations in London.
Last July, the fund expanded its UK footprint again, teaming up with Sime Darby and SP Setia to acquire and redevelop London’s Battersea Power Station.
This slew of acquisitions has brought financing opportunities to Malaysia, where local liquidity means demand for offshore financing has traditionally been low.
Malaysia’s offshore loan volume was a modest US$3.4bn in 2012, down from US$4.6bn the preceding year, according to Thomson Reuters.
EPF alone is in the market with a combined financing of over US$1bn, getting 2013 volume off to a promising start.
The fund is working on a separate £320m five-year loan related to its investment in four other UK properties. Terms are being finalised. The fund had asked banks to submit proposals for the deal last year.
Citigroup has had a co-ordinating role in the loan, which is expected to include several lenders that participated in another £300m five-year facility in March 2012. That loan, which paid an all-in of 145bp via a margin of 123bp over Libor, related to the purchase of three other London properties – Whitefriars on 65 Fleet Street, 40 Portman Square on Oxford Street, and 1 Sheldon Square in Paddington.
The £300m March 2012 loan came from Bank of Tokyo-Mitsubishi UFJ, Citigroup, OCBC Bank, Sumitomo Mitsui Banking Corp and Bank of Nova Scotia.
Malaysian regulations prevent EPF from providing any guarantee. However, the loan is secured against the three properties and also includes a put option where EPF is required to buy the properties. Lenders can exercise the option at any time in the event of a default.
The latest £320m loan is expected to include a similar put option.
EPF acquired the four properties related to the new loan in the works with internal funds. Proceeds of the loan, to be borrowed via a UK subsidiary that owns the properties, will part repay EPF’s investments or advances as a shareholder.
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