Huge debts: Chinese megabanks financed the government’s purchase of Vodafone
The government-supported acquisition of the Hungarian branch of Vodafone was finalised. As a result of the deal, the Hungarian state received a 49 percent stake in the telecommunications company. The other 51 percent went to 4iG, a partner in the purchase, well-known for being close with the government.
As we wrote, the HUF 660 billion (HUF 1.75 billion) transaction was not a cheap one. (Acquisition closed: Vodafone to disappear from Hungary) To help finance the acquisition, 4iG borrowed EUR 750 million from the state-owned Eximbank (export-import bank). In this case, however, the bank only played the role of mediator between the company and a consortium of different banks, all of whom contributed to the loan. We now have a complete list of those financial institutions which took part in the process, Telex reported.
Chinese interests
Back in February, 4iG CEO Péter Fekete only identified JP Morgan as one of the participants of the consortium. We know now that a large bulk of the money came from so-called Chinese policy banks. These are all commercial banks, but they serve investment, development, import and export interests. As such, the Chinese state uses these institutions for their economic interests as well, for example when financing international projects.
These 4 megabanks are:
– ICBC (Industrial and Commercial Bank of China),
– CCB (China Construction Bank),
– ABC (Agricultural Bank of China),
– BOC (Bank of China)
They are the 4 largest banks in the world, all of them work with budgets of USD 4000-5000 billion.
As it’s reflected in the names, there is a sense of distinction when it comes to the field of investment. They are technically private companies, but the Chinese state holds a significant share in all of them, they are all based in Beijing, and their leaders occupy important roles in government and in the Chinese Communist Party. With the exception of ABC, these banks all took the lion’s share worth of the funding in the loan given by Eximbank.
Economic or political decision?
However, it was not only the Chinese banks that financed the loan. We can also add JP Morgan to the list, the Italian Intesa-group, and Hüsnü Özyeğin Turkish millionaire (through the use of a Dutch bank). This means that the money lent by Eximbank included Chinese, Anglo-Saxon, Italian and Turkish funds. Overall, this distribution makes it a low-risk investment for the banks included.
As of now, we do not have any information whether these donors were approached specifically, or if there was any competition. Regardless, the Chinese banks without a doubt dominate the consortium. It’s also yet unclear if the composition of the syndicate was based on market preferences by JP Morgan, or the inclusion of the Chinese partners was possibly decided on a higher political level.
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Source: Telex