Tencent tests appetite for first dollar bond in more than a year

Wechat operator is offering a four-tranche deal.

Tencent Holdings is marketing its first dollar bond deal in more than a year, joining a growing band of Chinese borrowers in a recovering offshore debt market.

The Wechat operator is offering a four-tranche deal Wednesday, drawing down from its existing global medium term notes program, according to people familiar with the matter, who are not authorised to speak publicly. The deal includes its first potential 40-year dollar note, the longest tenor by Tencent, Bloomberg-compiled data show.

The Chinese social media giant is raising funds for debt refinancing and general corporate purposes, the people said. The company didn’t immediately respond to an emailed request for comment.

Higher quality Chinese borrowers have flocked back to borrow offshore after a March sell-off roiled markets and saw issuance dry up. Strong appetite boosted orders of Chinese dollar bonds to seven times their issuance size in April, with Baidu raising $1 billion and Xiaomi selling its debut dollar bond.

As US treasury yields “remain near historical lows and the curve remains pretty flat, it makes sense for corporate to secure long capital at low cost,” said Angus To, Hong Kong-based deputy head of research at ICBC International Holdings. Tencent’s initial price targets are fair considering the new issue discount, he said.

Final pricing could tighten further given the solid market sentiment toward investment grade names, he added.

Tencent’s deal also comes as Hong Kong protesters prepare for what could be their biggest day of unrest in months against China’s increasing control over the city. Hong Kong police has deployed a large number of officers downtown to deter demonstrations.

The appeal of attractive borrowing costs aside, China’s largest Internet firms remain hungry for cash as they increasingly expand beyond their comfort zones and wade onto each other’s turf, an expensive exercise that mirrors Silicon Valley’s evolution of years ago.

Tencent received a $6 billion foreign bond sale quota from China’s top economic planning agency, Bloomberg reported on Tuesday, citing people familiar with the matter. The firm may not use the full quota for their issuance, they said.

© 2020 Bloomberg