Foster's turns to Asia for funds

Foster's Group is the maker of Penfolds wine (above) and Victoria Bitter beer. Photo / Alan Gibson

Foster's Group, the maker of Victoria Bitter beer and Penfolds wine, and other Australian companies are turning to Asia for loans as some United States and European banks cut back on lending in the country.

"Pricing out of Asia is very reasonable," said Foster's chief financial officer Angus McKay. "Corporates like ourselves probably haven't looked to Asia enough, but now I think there is mutual interest with Asian investors wanting quality corporate names."

Foster's said last week that it hired ANZ Banking Group, Commonwealth Bank of Australia and Bank of Tokyo-Mitsubishi UFJ to help it borrow at least US$300 million ($475 million) from Asian banks.

It's following Melbourne-based Telstra, Woolworths of Sydney and Perth-based Woodside Petroleum, which obtained loans from mostly Asian lenders this month.

Asian banks increased their share of Australia and New Zealand syndicated loans to 7.6 per cent from 4.3 per cent this year after losing less amid the global credit crisis than peers in the US and Europe, according to data compiled by Bloomberg.

Beijing-based Bank of China and Mitsubishi UFJ Financial Group, based in Tokyo, were among Asian banks that had about 3 per cent of the US$1.4 trillion in losses and writedowns at financial companies around the world, the data show.

Bank of America, the biggest US bank, said on Thursday that it was raising US$2 billion from a stock swap to help plug a US$33.9 billion capital gap found by Government stress tests.

When ANZ sold shares in Australia this week it was to fund an expansion plan to buy Royal Bank of Scotland's Asian assets.

RBS, Britain's biggest Government-owned bank, posted a first-quarter loss this month after writing down US$7.8 billion as investments soured and bad loans increased in all its markets.

Woodside Petroleum, Australia's biggest oil and gas producer by market value, said on Tuesday that it obtained a US$1.1 billion loan from 26 domestic and international banks led by ANZ and Bank of Tokyo-Mitsubishi.

When the company's finance unit last borrowed in 2002 it chose Zurich-based UBS AG and WestLB of Dusseldorf, Germany to manage the deal.

Before Woolworths borrowed US$700 million this month from lenders including Singapore's DBS Group Holdings and Industrial & Commercial Bank of China, Australia's biggest retailer had used Asian banks once for loans since 2001.

Whereas Asian banks were "shoe-horned" into Australian loans in the past, now transactions are being tailored to their preferences as borrowers seek new sources of credit, according to Siong Ooi, ANZ's global head of syndications.

"Domestic bank liquidity in Australia has diminished relative to 12 to 24 months ago on the back of a total withdrawal or scaling back of the foreign banks that were previously active onshore there," Ooi said. "Four domestic banks can't pick up the slack for all the requirements of the market."

Overseas banks accounted for more than half the A$285 billion ($357.5 billion) in syndicated loans issued to Australian businesses since 2006, Prime Minister Kevin Rudd said in January, citing Merrill Lynch data.

Rudd backed the creation of the A$4 billion Australian Business Investment Partnership this year that would lend to local property companies should foreign banks curb lending in Australia.

Boston-based State Street Bank & Trust's gross loans and advances in Australia declined 55 per cent to A$678 million in the year to March 31, according to data posted on the Australian Prudential Regulation Authority's website.

- BLOOMBERG