Tencent Joins Debt Wave -- WSJ
January 13 2018 - 3:02AM
Dow Jones News
By Manju Dalal
This article is being republished as part of our daily
reproduction of WSJ.com articles that also appeared in the U.S.
print edition of The Wall Street Journal (January 13, 2018).
Chinese internet giant Tencent Holdings Ltd.'s visit to the bond
market this week marked the latest in a string of Asian technology
firms that have been issuing more debt as their market values have
swelled.
Tencent, which owns the popular messaging service WeChat and is
one of the world's largest videogame publishers, on Thursday priced
$5 billion in U.S.-dollar bonds that mature in five, 10 and 20
years -- its largest-ever bond sale.
The Shenzhen-based company last issued bonds about three years
ago. At that time, it priced its 10-year bonds at 2.05 percentage
point above U.S. Treasury yields, or 3.8%. This time it paid lower
rates to borrow: Its 10-year bonds were priced at 1.05 percentage
point above U.S. Treasury yields, or 3.595%.
Strong investor demand also allowed Tencent to price its 20-year
bonds to yield under 4% a year, locking in low long-term interest
rates. The offering also included five-year floating rate notes
that were priced at 0.6 percentage point above the three-month
London interbank offered rate, according to a banker on the deal.
That Libor benchmark was recently 1.7%.
Tencent's debt sale came about a month after Chinese e-commerce
behemoth Alibaba Group Holding Ltd. issued $7 billion in bonds with
maturities ranging from 5.5 to 40 years. Other Asian tech issuers
in the last year included Baidu Inc. and Lenovo Group Ltd.,
according to data provider Dealogic.
Together, the bond offerings reflect the growing significance of
corporate bond issuers in Asia, particularly from China. Chinese
tech companies issued $12.1 billion in dollar bonds in 2017, more
than four times as much as the year before, according to Dealogic.
Outside of the banking sector, only real-estate companies and
so-called holding companies -- often known as conglomerates --
issued more debt from China.
Chinese real-estate companies issued $27 billion in bonds last
year, nearly three times as much as a year ago, while conglomerates
raised about $13 billion, nearly 2.5 times their 2016 fundraising.
Overall, Chinese companies raised $118 billion in bonds last
year.
In the past few years, Asian tech companies have seen a meteoric
rise in their market capitalization. At the same time, their debt
levels have remained relatively low, giving them room to raise more
funds from the bond markets. Shares of Tencent and Alibaba roughly
doubled last year.
In doing so, Chinese tech firms are following the lead of Apple
Inc., the world's largest tech company by market value, which has
issued billions of dollars worth of bonds in recent years despite
having a sizable cash balance.
"These companies seem to be taking advantage of the strong
(bond) markets at the moment," said Luther Chai, a research analyst
from CreditSights in Singapore.
Bond markets have been on a tear in the past year as investors
have rushed to buy debt issued by companies, particularly those in
Asia. Thanks to this strong demand, the cost of borrowing money
using bonds is now around its lowest in many years.
Like its Asian peers, Tencent is likely to use the funds raised
to partially repay its existing debt and for future acquisitions.
The company has $3 billion of debt maturing during the first three
quarters of 2018, Mr. Chai noted in a research note earlier this
week. Tencent already owns stakes in prominent overseas companies
including Snap Inc., Tesla Inc. and Spotify AB.
As with Alibaba's offering, Tencent's bond offering received a
positive response from investors in the U.S. who placed nearly half
of the roughly $42 billion in orders for the deal, according to a
person familiar with the matter.
Tencent's bonds are expected to be rated A2 by Moody's, a notch
below those of Alibaba.
The bond offering followed two days of meetings with investors
in Asia, Europe and the U.S. via 14 banks including Deutsche Bank
AG, Bank of America Merrill Lynch and HSBC Holdings PLC.
Write to Manju Dalal at manju.dalal@wsj.com
(END) Dow Jones Newswires
January 13, 2018 02:47 ET (07:47 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.
Tencent (PK) (USOTC:TCEHY)
Historical Stock Chart
From Mar 2024 to Apr 2024
Tencent (PK) (USOTC:TCEHY)
Historical Stock Chart
From Apr 2023 to Apr 2024