What funding drought?

The recently concluded buyout of South Korea's Oriental Brewery by global giant Kohlberg Kravis Roberts and pan-Asian GP Affinity Equity Partners from Anheuser-Busch InBev is a good sign for buyout funds investing in the region.

For one, it's the largest buyout in Asia so far this year. Perhaps more importantly, the successful syndication of debt for the deal in a challenging credit environment is a major confidence boost.

Of the $1.8 billion paid for Oriental Brewery assets, KKR and Affinity injected $800 million in equity while the remainder was raised from a consortium of banks and vendor financing from Anheuser-Busch InBev.

A total of $850 million was arranged in senior financing from a consortium of 16 international and Korean banks consisting of a Korean won senior secured credit agreement and a US dollar senior secured floating rate note facility, according to law firm Paul, Hastings, Janofsky & Walker, which advised the mandated lead arrangers and lead managers on the senior financing for the deal.

JPMorgan Chase Bank, Nomura International, HSBC and Standard Chartered Bank acted as underwriters for the financing, while other banks in the funding consortium included Calyon; ING Bank; Natixis; WestLB; DBS; Hana Bank; KDB; Korea Exchange Bank; National Federation of Fisheries Cooperatives – Suhyup Bank; Shinhan Capital; Sumitomo Mitsui Banking Corp; and UOB.

The make-up of the banking consortium clearly demonstrates the willingness of regional Asian banks, including Korea-focused ones, to fund large deals.

A source involved in the deal says that “syndication of debt for the deal was very successful and it was oversubscribed”. The source adds that there was a lot more demand for taking on the debt than most realised. Korean banks, in particular, said the source, were very enthusiastic about the Oriental Brewery deal.

A Korean GP says that Korean banks in general have become far more conservative since the early part of 2008, prior to which they were on a lending spree and funded most deals that came their way.

However, the fund manager says banks in Korea still have an appetite to fund good deals because they have the liquidity. He says banks in the country are more comfortable lending in Won as opposed to other currencies.

It is possible to obtain debt of up to four times EBITDA quite easily from Korean banks, provided it is a “good deal”, which the buyout of Oriental Brewery essentially was, he adds.