Report: Harbin syndication falters

The syndication of a $282m leveraged loan connected to a private equity investment in China’s Harbin Pharmaceutical appears to be struggling to attract support.

According to a report issued by China’s Xinhua Financial Network, Heilongjiang-based drugs firm Harbin Pharmaceutical is having trouble attracting banks to participate in the syndication of a $282 million (€234 million) leveraged loan.

The loan helped finance a private equity deal struck in November 2005, in which global investor Warburg Pincus and Chinese investment bank CITIC Capital acquired 22.5 percent stakes each in Harbin. The loan was launched into syndication by arranger Citigroup the following month.

According to Xinhua, only $85 million of commitments have been attracted so far: $50 million from Industrial and Commercial Bank of China and $35 million from the Netherlands’ ABN Amro. This leaves $197 million on Citigroup’s books. 

It is understood that banks are partly deterred by the promise of being repaid by proceeds stemming from the planned re-flotation of Harbin, which was delisted when the deal was struck last year. Such a prospect does not appear likely in the near term given that Beijing has not allowed any share sales in China’s domestic equity markets in over a year.

In addition, there are understood to be concerns that the subsidiary company already has a substantial amount of debt and that the latest loan, taken out by the holding company, would be largely subordinated to that existing debt.

The lack of interest is in spite of a generous pricing of 322 basis points over Libor for banks contributing at least $50 million on the five-year loan.