In house view with GE Capital and Nomura
Peter Siembab, In-house counsel, Nomura
What kinds of deals are you seeing in the sector at the moment?
It has been an amazing year to see the swing in the market from the heights of the liquidity crisis to the more fluid markets of December. Currently we are seeing increased interest and activity in the banking and finance sectors, with ample credit available; however, the challenge has been finding the right deals. For example, for sponsors there have been a limited number of opportunities where sponsors can secure control or even take the target private.
How do you see the market evolving in the next year?
I don’t see the situation about finding the right deals changing much in the near future but I do expect to see increased outbound activity from China and India. With ample financing available, I would expect that for any financings that do arise that the terms and conditions for those financings would continue to loosen. Also, as the markets continue to grow in confidence, I expect to see a re-emergence of private loans marketing, including the pre-IPO and club deals. I don’t expect to see a return of the 100% underwriting of loans in the immediate future.
What kinds of issues are affecting your deals at the moment?
The unknown here is whether this outbound business [from China and India] will need financing as the buyers may have sufficient cash to fund these deals. Lenders will be looking for any competitive edge they can get to secure a role in these limited opportunities.
What advice do you generally seek from external legal counsel and how can they best assist you in this environment?
From our external counsels I hope that they keep abreast of the changing trends in the market, particularly with respect to the terms and conditions of financings. What may be market today may be overly conservative tomorrow. If counsel can alert us to these changes, it will allow us to be more competitive.
Geoff Culbert, general counsel, GE Capital Asia Pacific
What kinds of deals are you seeing in the sector at the moment?
The consumer finance market has remained strong throughout the year, particularly in Australia and Korea. We are starting to see a stronger pipeline of LBO and acquisition finance deals after a quiet start. We are also seeing a lot of activity on the PE side and recently made a cornerstone investment in [heavy equipment manufacturer] SANY's IPO in Hong Kong.
How do you see the market evolving in the next year?
With valuations having come down over the past year, and greater stability returning to the market, I would expect to see a lot more activity in PE and M&A, with the LBO and acquisition finance markets coming back in support. I would also expect to see companies begin to reinvest in their businesses after limited capital investment over the past year. That should see opportunities in asset based finance and leasing.
What kinds of issues are affecting your deals at the moment?
Our existing deals are performing well. With the worst of the financial crisis hopefully behind us, we are very optimistic about the quality of our portfolio. On new deals we are seeing more realistic pricing and structuring compared to where the market was pre-Lehman, which is encouraging.
What advice do you generally seek from external legal counsel and how can they best assist you in this environment?
We typically engage outside counsel to assist with large, resource-intensive matters such as M&A, and specialist areas such as litigation and employment law. Not surprisingly, over the past year we have also worked with bankruptcy and restructuring counsel on complicated work-outs. We do not maintain a formal legal panel. Our preferred providers are generally leading international firms who have regional coverage, as well as domestic top-tier and specialist law firms who are cost-effective. We always look for our external counsel to provide proactive and efficient service at a reasonable cost, but those qualities are more important than ever in the current environment.
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