Asia companies find credit hard to obtain<\/p>\n
HONG KONG (Reuters): Asian companies are finding that bank
\nletters of credit and other financing for commodities trade have
\nbecome more costly and harder to obtain in the midst of the
\nregion's economic malaise.<\/p>\n
Bankers and traders say the pace of deals has slowed in
\nseveral countries in commodities from sugar to palm oil as well
\nas in consumer goods trade.<\/p>\n
South Korea has been hit hardest, but traditional trade
\nlending also has tightened in Japan, Indonesia and Thailand, the
\nbankers and traders said in interviews.<\/p>\n
"Balance-sheet lending for trade is suffering very much," said
\nAiden Applegarth, head of structured trade finance for East Asia
\nat Union Bank of Switzerland in Singapore.<\/p>\n
The causes of the problem are overextended local banks and the
\nheavy, dollar-denominated debt load of companies in the Far East,
\nwhere currencies have fallen sharply against the dollar.<\/p>\n
The squeeze comes as the International Monetary Fund doles out
\nbillions of dollars in aid for South Korea, Thailand and
\nIndonesia.<\/p>\n
Also, the recent bankruptcy protection filing by Japanese food
\nbroker Toshoku Ltd has shaken confidence in Japanese commodities
\nbusiness.<\/p>\n
Grains and sugar traders say South Korean buyers have told
\nthem they cannot get letters of credit from Korean banks.<\/p>\n
"Korean banks are so shaky, they don't want to take any
\nrisks," a sugar trader said.<\/p>\n
In addition, traders say international banks have refused to
\nconfirm, or stand behind, letters of credit from Korean banks.<\/p>\n
Chris Hothersall, head of Asian trade services at HSBC
\nHoldings' Hongkong and Shanghai Banking Corp Ltd, said his bank
\nwas being more selective but still sought business in South
\nKorea.<\/p>\n
"We don't say 'no' to every bank. We look on a case-by-case
\nbasis," said Hothersall, whose bank was among the top three in
\nthe region in trade financing.<\/p>\n
"We are all a lot more cautious," he added.<\/p>\n
South Korean sugar buyers, instead of offering letters of
\ncredit, were seeking to do business on a so-called cash against
\ndocuments basis.<\/p>\n
"The supplier assumes the buyer will pay when the documents
\nare presented. The supplier is taking the buyer's risk. That will
\nmake trade more difficult," one banker said.<\/p>\n
In South Korea where the won has nearly reached 2,000 to the
\ndollar, trades for the purchase of corn from China may have to be
\ndeferred because feedmills cannot get financing, a trader said.<\/p>\n
But the credit predicament has opened opportunities too,
\nHothersall said.<\/p>\n
Companies which had been loyal to local banks were now seeking
\ntrade financing from international banks.<\/p>\n
UBS's Applegarth said bank fees for letters of credit have
\nrisen 30 percent in some cases.<\/p>\n
Another international banker said Japanese companies were
\nincreasingly turning to non-Japanese banks for trade financing.<\/p>\n
"Japan Inc. is breaking down. Banks and corporations are
\ncoming to foreign banks now, which is very unusual on the trade
\nside," the banker said.<\/p>\n
Applegarth said the trend was for banks to become involved
\nearlier and insist on more structured finance deals in which the
\nbuyer pledges assets as security.<\/p>\n
"Those who have established track records will be OK, but many
\nothers will have to change," he said.<\/p>\n
"For the next six to nine months I anticipate a rough ride for
\nmany players," he added.<\/p>",
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