Taiwanese banks have full collateral for the multimillion-dollar syndicated loan to an affiliate of Chinese solar energy conglomerate Hanergy Holding Group Ltd (漢能控股), which saw the shares of one of its subsidiaries tumble on Hong Kong’s main bourse last week, Financial Supervisory Commission (FSC) Chairman William Tseng (曾銘宗) said yesterday.
Hanergy Thin Film Power Group Ltd (漢能薄膜發電集團) shares tumbled nearly 50 percent on Wednesday last week, erasing more than NT$570 billion (US$18.65 billion) from its market capitalization.
That sparked concern over seven Taiwanese creditors’ syndicated loan to Hanergy Capital Ltd (漢能資本), another affiliate of Hanergy Holding.
In December last year, Hanergy Capital signed a contract for an US$82 million syndicated loan led by Taiwan’s Bank SinoPac (永豐銀行). Ten other banks, including six from Taiwan, participated in the loan. It was the first time lenders from both sides of the Taiwan Strait collaborated on a syndicated loan.
Tseng said that it is inappropriate to call the syndicated loan “a time bomb,” as Hanergy Capital has offered letters of credit from China’s Bank of Communications Co (交通銀行) and the Export-Import Bank of China (中國進出口銀行) guaranteeing up to US$79.54 million of the loan.
Moreover, Hanergy Thin is not facing any financial or operating problems, and the main concern stems from its drastic stock price decline, he said.
Tseng said the commission has asked Taiwanese banks to raise provisioning for their China exposure to 1.5 percent of their total Chinese loans by the end of this year, with the commission set to launch a more complete financial examination of their exposure to monitor the situation.
The commission conducted a stress test on domestic lenders’ exposure to China late last year, with the results showing that the local banking sector could withstand the pressure given a risk-based capital of above 8 percent, the minimum required by the government.
Tseng added that the controversy over the Taipei Dome (台北大巨蛋) project has made local banks and insurers more cautious about participating in syndicated loans for build-operate-transfer (BOT) projects.
State-run Mega International Commercial Bank (兆豐銀行) heads the NT$15.4 billion syndicated loan for the Taipei Dome, with superficies rights to the project.
That means if the Dome is not completed, government-owned banks participating in the loan will not be able to get a penny back.
In related news, Tseng said the timing of the US Federal Reserve’s policy rate hike remains a major uncertainty that would continue to affect the TAIEX’s trading momentum.
As of Thursday last week, portfolio investments by foreign investors stood at a net US$204.6 billion, marking a new record high, Tseng said, adding that the funds would flow into the local stock market “sooner or later.”
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