Baidu raises $1 billion in US-targeted bond

Baidu attracts $4 billion of orders within three hours amid robust US investor bid.
Baidu was the first Chinese company to list on Nasdaq
Baidu was the first Chinese company to list on Nasdaq

Baidu, a Chinese search engine, has returned to the US dollar market, raising $1 billion in the first sizeable dollar bond from a Chinese company during the past few months.

The SEC-registered deal was announced at 9pm Asia time on Tuesday and books were kept open for three hours, attracting $4 billion worth of orders within that time, with demand heavily driven by US investors.

Baidu did not hold a roadshow and relied primarily on US investors to get the deal done. While Asian investors drove most of the bond issuance during the first five months of this year, that bid has faded and issuance has sputtered during the past two months, while the US bond market, in contrast, has remained active. According to Dealogic, US issuers raised $97 billion from dollar bonds in July, compared to the $4.1 billion raised by borrowers from Asia ex-Japan.

Nasdaq-listed Baidu was co-founded by Robin Li, who is one of China’s richest men and the chief executive of Baidu. It is somewhat unusual as it has access to the US market, having already issued an SEC-registered debut bond last year. That bond similarly targeted US investors and although no distribution statistics were released, it was heavily taken up by US investors.

“The Asian investor base is great in bull markets and for unrated paper, but in these markets there is no interest,” said one source. “You have real money accounts in the US that put in orders of $100 million, whereas in Asia you don’t have that,” said one source familiar with the deal. “We’re advising our clients to tap the US market if they can. But you definitely need to be rated.”

The initial guidance for the five-year bond was at the area of Treasuries plus 205bp and this was revised to 190bp to 200bp, with the bonds pricing at the tight end. The coupon was 3.25%. Baidu paid a coupon of 2.25% last year, when it issued a $750 million five-year bond, a reflection of how much rates have gone up.

The company this month signed an agreement to buy 91 Wireless Websoft, a Chinese online mobile-app store from China’s NetDragon Websoft for $1.9 billion. According to the source, some of the proceeds may go towards the acquisition.

Goldman Sachs and J.P. Morgan, which handled Baidu’s debut bond last year were retained as joint bookrunners for its latest deal.

¬ Haymarket Media Limited. All rights reserved.
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