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    Harbin Pharmaceutical syndicated loan meets thin response 1/16/2006
    The syndication of a 282 mln usd loan for the leveraged buyout of China's Harbin Pharmaceutical Group is having trouble bringing in a consortium of banks to fund the facility on doubts the company can repay the loan on time, The Standard reported citing market sources.

    The loan, which will be used to engineer China's first leveraged buyout, was launched into syndication by arranger Citigroup in December. But it has so far attracted only 85 mln usd in commitments, the Hong Kong-based newspaper said.

    Industrial and Commercial Bank of China (Asia) will contribute 50 mln usd while ABN AMRO will offer 35 mln usd, the report said.

    The lack of interest is despite the ultra rich spread of 322 basis points over the London interbank offered rate for banks that contribute at least 50 mln usd on the five-year loan.

    But the banks are balking at the fact they would be repaid by proceeds from a reflotation of Harbin Pharmaceutical, a unit that was delisted from the Shanghai exchange when US buyout firm Warburg Pincus and two partners arranged the LBO late last year, the report said.

    Banks have doubts whether such a listing will emerge as Beijing has not allowed any listings on China's domestic equity markets in almost a year.

    China's market regulators have banned such sales until a reform program to boost China's sagging stock markets is completed.

    Beyond the equity issue, bankers are concerned that the subsidiary already has a substantial amount of debt. The latest loan, taken out by the holding company, would be largely subordinate to that.

    In November, Warburg and CITIC Capital Markets Holding took a 22.5 pct each in Harbin while a further 10 pct was taken by a domestic private equity partner to gain control of the company.

    The city of Harbin, the capital of Heilongjiang province, owns the remaining 45 pct.

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