Suning to raise HK$5.54b in first public bond sale
Mainland electronics retailer to use proceeds to expand store network and online presence
Suning Appliance, the mainland's biggest electronics retailer by market value, is raising 4.5 billion yuan (HK$5.54 billion) in its first public bond sale as it seeks to challenge e-commerce giants with its own web venture.
The store operator, which started selling Apple's iPhone 5 in shops last week, offered the five-year notes at 5.2 per cent. That compares with the 4.96 per cent average yield on similar-maturity debt of top-rated Chinese companies and the 3.27 per cent on five-year government bonds. Globally, securities of retailers yield 2.06 per cent, according to Bank of America Merrill Lynch indices.
Suning's bond sale shows investors are willing to support the largest consumer companies as China's new leadership under Xi Jinping seeks to stimulate domestic demand to compensate for flagging growth in exports.
The Shenzhen-listed company is investing in an online business that has a 3.1 per cent share of web-based retail sales in China, trailing Alibaba's 50.6 per cent, according to industry researcher Euromonitor International.
"The funds raised by the bond sale will likely be spent on the e-commerce business because it requires heavy investment," said Yang Xia, an at China Merchants Securities.
Suning will use the bond sale proceeds to boost its financial strength and help it expand research and development, procurement and logistic functions, according to its prospectus. It will use the funds for projects related to expanding its Suning retail chain stores, Laox stores and Suning.com website, according to the document. The retailer aims to expand its web business to cover at least 99 per cent of the cities in China by 2020, it said.
"The bond sale will certainly strengthen Suning's financial position which enables it to make some acquisitions, especially among online retailers, in order to beef up its e-commerce business," said Zhang Lu, a Shanghai-based analyst at Capital Securities. "It's hard for Suning to raise funds via the equity market and that will put further pressure on its share price."