Sign of stress occurred in China, as the island continued to lose prospective lenders. Almost three years, Ginkgo offers $639.6m five-year buyout financing. Now, as the proud private equity and shareholders in Asia, Ginko launched a rare Taiwanese leveraged loan. It is for their planned management buyout to expose more lenders in China, said IFR Asia. Meanwhile, Ginko’s concentration in China might inflict risk.
Ginko International is the biggest contact lens supplier both in China and Taiwan. Its market share alone covers 20% in China. Rare leveraged loans and attractive financing terms could attract lenders, believed Ginko. Taiwanese state-owned bank loan manager argued that gaining credit approval is hard when the company only focuses in China. Regulators continue to scrutinize and impose lower lending and investment in China.
Taiwanese have minimized their exposure to Chinese firms since 2019. This is because of the escalation in the U.S.-China tensions and increased risk in the mainland. This makes the reason why the amount of Chinese credit and investment plunged to 10% in 2021, according to the Financial Supervisory Commission.
FSC also agrees that China’s exposure to Taiwanese banks cannot reach 100% of their net worth. In 2021, 34% from 53% are down from all Taiwanese banks. According to some bankers, LBO loans could fall outside FSC rules, while Ginko relies heavily on China. But this LBO loan is not under China deal because the sponsors are not Chinese, said a senior syndicated banker. Offshore equity investment that does not flow in China, is the concept.
Nine banks have underwritten the borrowing. Seven of those banks are Taiwanese. Some participants are concerned about Ginko’s concentration in China that might be risky. But Ginko shows confidence in its performance and borrowing appeal.
