HONG KONG: Wall Street banks are taking their unicorn playbooks to China.
After arranging billions of dollars in loans for highly valued -- and money-losing -- U.S. startups like Uber Technologies Inc., banks including Morgan Stanley and Goldman Sachs Group Inc. are angling to do the same for some of China’s biggest unicorns.
But that’s no guarantee as China’s trade war with America spreads to the technology industry, heightening investor concerns over frothy valuations. "The returns on these loans are usually acceptable, given that leverage tends to be low and given the expected future cross-sell opportunities, including future capital markets and trade financing,” said Benjamin Ng, head of Asia Pacific debt syndicate and acquisition finance at Citigroup Inc. in Hong Kong.
"Banks have gotten a lot more comfortable lending to these asset-light companies,” said Vey-Sern Ling, an analyst at Bloomberg Intelligence in Hong Kong."If your competitor is lending to these billion-dollar startups, you can’t not be there.”They were bookrunners on Bytedance’s loan and are now leading a facility of as much as $1 billion for Beike Zhaofang, which runs an online property brokerage.
Beike asked banks for an interest margin of 210 basis points, people familiar with the matter said in May.
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