Two of China’s most well-known and successful international companies are planning offshore bond deals that are likely to prove a blow-out with investors so long as they do not get too greedy with pricing.
China's telecoms equipment maker Huawei Technologies is hoping to raise $2 billion from a 10-year bond according to bankers familiar with the transaction.
ANZ, Bank of China, DBS, HSBC and Standard Chartered have been mandated to lead the deal, which will fund the Shenzhen-based company’s overseas expansion.
Meanwhile Nasdaq-listed JD.com is hoping to raise $1.5 billion from a debut international bond deal led by Bank of America Merrill Lynch and UBS, with Barclays as underwriter.
The two banks were also the lead managers for the e-commerce giant’s $1.8 billion initial public offering in 2014.
China's first offshore tech bond of 2016
Huawei’s deal will represent the first international tech bond from China this year.
The company made its international bond market debut last May, when it raised $1 billion from a 10-year deal that carries a coupon of 4.125%. On Wednesday, the deal was trading on a bid/offer price of 103.3%/103.61% to yield 3.69%/3.65%.
The company has long had a reputation for secrecy and remains unrated. However, one banker said it wants to be more transparent.
The banker added that unlike many of its compatriots, Huawei is also willing to offer a more market-friendly deal and pay a modest new issue premium to investors in order to develop a long-term relationship.
"Huawei is a well-known name in China and has an ambitious expansion strategy," the banker commented.
A household name in China, Huawei also now ranks the world's third largest smartphone manufacturer by shipments behind Samsung and Apple.
Revenues rose 37% year-on-year to Rmb390 billion ($60 billion) in 2015, while net profits jumped 32% to Rmb37 billion. Revenues from overseas markets generate about 60% of the total, making Huawei one of China’s most successful international operators.
Huawei was founded in 1987 by a former engineer in the People's Liberation Army Ren Zhengfei and sells a range of technology products from high-end smartphones to networking equipment such as routers and LAN switches.
JD.com makes international debut
Key for JD.com will how much of a premium it has to pay over archrival Alibaba given it is still loss making. This amounted to Rmb7.6 billion in the fourth quarter.
Alibaba's inaugural international bond will also take some beating in terms of headlines. The A1/A+ rated group made its debut in November 2014 with a six-tranche issue that raised a bumper $8 billion and attracted an even more impressive $55 billion order book.
On Wednesday, the 3.6% 2024 tranche was trading on a bid/offer price of 102.05%/102.35% to yield 3.32%/3.28% or a z-spread of 181bp.
