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To Help Finance Syngenta Bid, Chemchina Setting Up $5 Billion Fund: Basis Point


12/01/2016


To Help Finance Syngenta Bid, Chemchina Setting Up $5 Billion Fund: Basis Point
To help finance its purchase of Swiss seeds group Syngenta, China National Chemical Corp or ChemChina is reportedly setting up a fund that will aim to raise $5 billion for that purpose, reported Thomson Reuters publication Basis Point quoting two sources with direct knowledge of the matter.
 
In a move that would help the state-owned firm lower the debt burden of its planned $43 billion acquisition, the media report said that the financing structure entails investors committing to the fund, which would in turn own equity in Syngenta.
 
The sources further added that to help fund the largest ever foreign purchase by a Chinese firm, ChemChina is targeting about $25 billion in equity commitments on the overall.
 
With the help of more than 20 lenders, including Chinese, European and other Asian institutions, the company has arranged $32.9 billion in bridge loans, reported Reuters quoting sources with direct knowledge about the issue. However lenders, investors and analysts alike are of the opinion that level of gearing is viewed as too high for comfort for them.

China of late has been eager to improve domestic food production and therefore the success of the deal, which still must clear regulatory hurdles, is key for the country’s plans.
 
According to Fitch ratings agency, the reason behind China’s such plans lies in the facts that China has less than 10 percent of the world's arable land but more than 20 percent of the world's population and the country‘s agricultural yields are more than 40 percent lower than those of most Western countries.
 
The sources said hat in what is a coup for the state-run Postal Savings Bank of China (PSBC) as it only set up its investment banking department about a year ago, ChemChina has hired the bank to arrange the fund.
 
The sources declined to be identified as the discussions are confidential, reported REuters. Representatives for ChemChina did not respond to telephone and emailed requests for comment from Reuters for the report. PSBC declined to comment.
 
The sources said that including some trust companies and investment funds in China, PSBC has reached out to potential investors.
 
The media have previously reported that $5 billion in equity from Feng Xin Jian Da LP, a fund managed by CITIC Trust Co Ltd, a unit of conglomerate CITIC Ltd, has been already secured by ChemChina in addition to the planned fund.
 
What other ways ChemChina aims to boost the equity financing portion of the deal was not yet immediately clear.
 
Claiming that the companies had not allayed concerns over the deal, EU antitrust regulators opened an in-depth investigation into ChemChina's bid in October. The deadline for the decision has been pushed back by 10 days to March 29.
 
(Source:www.reuters.com)