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Global hop market

A local alternative to mass beer suggested by independent brewers has been successful and is now altering the global market. Beer is becoming more diversified, so transnational companies have to accept the new game rules and to switch focus to young and fast growing markets. All these processes increased the demand for aroma and bitter hop as well as their acreage expansion on two continents. However now there appeared a downward trend of alcohol consumption in the world, so even special sorts can soon turn to be sufficient. In this connection the dynamic American hop market is already facing some problems. EU hop producers have become more cautious, they are not racing to exceed the demand and look forward with more confidence, judging by the contract terms. 

Hop Market in Russia

Germany still dominates the Russian market, yet over the recent two years one has been able observe a continuous success of Czech hop suppliers. Their expansion and growing popularity of hops from the United States became the drivers of supplies growth in 2016 despite the preceding modest harvest crop in the EU, as well as the factor of relative stability in 2017. In this connection, in 2017, the ratio of the varieties continued to shift towards the aroma ones, and the supplies of Magnum hop and other alpha varieties were reduced. However, the import of bitter hop pellets is partially replaced by extracts, especially from the major beer manufacturers. Total volumes of alpha acid supplies, according to our estimation, decreased by approximately 5% and returned to the level of 2015. Barth Haas Group continues dominating the hop products market; HVG also increased its weight. At the same time, Morris Hanbury significantly reduced the supplies in 2017.

SABMiller’s Fosters bid loan totals $12.5 billion

Global brewer SABMiller is raising a $12.5 billion syndicated loan to back its hostile bid for Fosters , banking sources said on Thursday.
The dollar-denominated loan is priced at around 90 basis points (bps) over LIBOR, the sources said, well under European banks' dollar funding rates which spiked this week.

The loan includes an 18-month bridge loan to bond issues of around $8.5 billion and also includes three and five-year term and revolving facilities, one of the bankers said.

SABMiller is arranging the loan itself and has asked banks to commit $1.6 billion each.

SABMiller is pushing to close its jumbo loan as Europe's dollar funding crisis deepens.

SABMiller is expected to raise the full amount of the loan from banks with easy access to dollar funding -- either U.S. banks with dollar retail deposits or Japanese banks with lower funding costs.

The decision to join the loan is a painful one for many of Europe's top arranging banks, which are paying nearly twice as much for dollars as the loan's interest margin.

The marginal cost of dollar funding is more than 200 bps, using Credit Default Swaps as a proxy, a senior loan banker said.

"Dollar funding costs are worse now than when this loan was discussed. In the last 10 days, everyone has seen the cost of funding dollars on a marginal basis ramp up," he added.

While banks will net significant ancillary business from the company's planned bond issues, European banks will lose money on the loan component.

"Banks will have to swallow the implied cost of funds to get the ancillary business," the senior loan banker said.

The loan may be syndicated further at a later stage to reduce banks' exposure and risk.

The loan's pricing varies across the different maturities of the tranches. Pricing on the bridge loan steps up over time to encourage an early refinancing in the bond market.

The $12.5 billion loan is expected to be signed on Friday, the sources said.

19 Aug. 2011

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