Tencent to bolster expansion plans with record bond sale
Firm raising US$2.5b as it steps up investments in digital content, mobile utilities, online financial services and the global expansion of WeChat
Internet giant Tencent will move a step closer to firming up its expansion initiatives this year after completing next week a dual-tranche notes offering worth US$2.5 billion, which marks the biggest bond issue by a technology company in Asia, excluding Japan.
Shenzhen-based Tencent priced its US$500 million tranche of three-year notes at 99.797 per cent with an annual interest rate of 2 per cent, while its US$2 billion five-year notes were priced at 99.895 per cent with a coupon of 3.375 per cent, according to the company's filing with the Hong Kong stock exchange yesterday.
The offering represents the initial issue under the US$5 billion medium-term note programme that Tencent, Asia's largest-listed internet company, set up earlier this month before rival Alibaba Group's much-anticipated initial public offering in the United States.
A Tencent spokeswoman said the company expected to complete the initial bond transaction next Tuesday in New York, after which the notes will be listed in Hong Kong and begin trading next Wednesday.
She declined to confirm reports yesterday that the notes were oversubscribed, reaching the US$13 billion range on orders of mostly US investors before Tencent announced the final pricing of the notes.
The company estimated the net proceeds to reach US$2.49 billion, which it will use "for general corporate purposes".
Ricky Lai, an analyst at Guotai Junan International, said the bond programme "represents a positive development for Tencent as the company continues to expand its operations".
Tencent, e-commerce market leader Alibaba and online search giant Baidu have been the most active mainland internet companies involved in high-profile mergers and acquisitions since last year.
According to its senior management, Tencent will step up investments this year in digital content, mobile utilities, online financial services and the global expansion of messaging platform WeChat, which has an estimated 400 million users and is called Weixin on the mainland.
Hong Kong-traded Tencent is also focused on the games business since it is the biggest company by revenue in the US$70.4 billion global games market. Last month, the firm spent US$500 million to buy a 28 per cent stake in Korean mobile games developer CJ Games.
Credit agency Standard & Poor's has assigned its A-minus long-term issue rating and cnAA long-term greater China regional scale rating to Tencent's US$2.5 billion in senior unsecured notes.
It said Tencent's stable outlook was based on "the favourable growth prospects of China's internet industry and the company's sound financial standing".
An earlier version of this story said Tencent's US$500 million tranche of three-year notes at 99.797 per cent has an annual interest rate of 3.375 per cent. It should be 2 per cent.