UBS saved Ping An deal with $5.5bn loan

UBS loan critical to ensuring approval from the Chinese insurance regulator

The mystery lender behind a Thai billionaire's $9.4 billion purchase of a stake in China's second-biggest insurer was UBS, which offered a last minute and complex financing package known to only a few involve. Photograph: Reuters/Michael Buholzer

The mystery lender behind a Thai billionaire's $9.4 billion purchase of a stake in China's second-biggest insurer was UBS, which offered a last minute and complex financing package known to only a few involve. Photograph: Reuters/Michael Buholzer

 

UBS provided a secret loan of about $5.5 billion to enable a Thai company to purchase HSBC's stake in a Chinese insurer earlier this year, according to people familiar with the deal.

Thailand's agribusiness giant Charoen Pokphand Group bought HSBC's 15.6 per cent stake in Ping An, China's biggest private insurer, for a total of $9.4 billion, closing the deal in February.

There was no disclosure at the time of UBS’s role in financing the transaction.

The acquisition looked as though it could be on the brink of collapse when China Development Bank, a major Chinese lender, withdrew financing for CP Group in January before it made the final payment tranche of the purchase.

But UBS, the sole adviser to CP Group on the deal, stepped in behind the scenes to provide a five-year loan of roughly $5.5 billion to plug the gap, according to people with knowledge of the arrangement. CP Group had said it had the "necessary resources" to complete the deal and made no mention of external financing.

This UBS loan, which was first reported by Reuters, was critical to ensuring that the transaction received approval from the Chinese insurance regulator.

"All parties were pleased with the transaction," said one of the people familiar with the deal.

UBS declined to comment. CP Group was not immediately available for comment.

CDB pulled its financing for the deal after Chinese media reported that CP Group was in part serving as a front for Chinese investors who were the real buyers of the Ping An stake. CP Group denied the reports, saying that it was not acting on behalf of any third party.

UBS stands to make a sizeable profit from its role in keeping the deal alive. It is expected to earn about $100m from the loan over the next five years.

Chinese-Thai tycoon Dhanin Chearavanont, chairman and chief executive of the unlisted CP Group, is a private banking client of UBS and has worked with the Swiss bank on previous acquisitions.

His assets formed the collateral for the Ping An loan. To spread the risk, UBS syndicated part of the loan to other private banking clients.

Copyright Financial Times Ltd 2013