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Syndicated loans: Vale loan speaks volumes

European banks target Latin America

The $3 billion five-year revolving credit facility for Brazilian iron-ore producer Vale demonstrates that European banks are strategically targeting Latin American companies in preference to corporates in Asia’s emerging markets. That is the conclusion that one Hong Kong-based banker drew from the huge interest European banks took in Vale’s recent syndicated loan.

The deal, which closed in April, was led by Crédit Agricole, JPMorgan, Mizuho and Natixis. The loan was priced relatively tightly, believed to be 65 basis points over Libor plus fees of 15bp for up to 66% use of the facility and 30bp for greater use. The syndicate included Santander, HSBC, Bank of America, Bank of Nova Scotia, CIBC, Société Générale, Bank of Tokyo-Mitsubishi UFJ, Bradesco, Sumitomo, Royal Bank of Canada, Bank of China, Morgan Stanley, Credit Suisse, ANZ, Goldman Sachs, National Australia Bank and DZ Bank.

"In the past we might have expected these European banks to participate in syndicated loans for Asian companies but in recent deals we’ve only seen HSBC," says the banker, who notes that similar deals for Asian companies have paid 50bp more than this loan for Vale. The banker also says the amount offered to the company reached more than twice the volume originally demanded by Vale.

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