Baidu bond sale funds takeover
Baidu, operator of the mainland's most popular search engine, sold US$1 billion of five-year bonds in the country's largest overseas corporate debt sale in two months to help fund the takeover of app store 91 Wireless Websoft.
The senior unsecured notes were priced to yield 3.29 per cent, or 1.9 percentage points over similar-maturity US Treasuries. This is the company's first offering abroad since it issued US$1.5 billion of debt in November.
Average borrowing costs have surged for mainland companies by 1.26 percentage points this year, compared with a 1.09-percentage-point jump in emerging-market corporate yields, JP Morgan Chase index data shows.
The sale is the mainland's second benchmark issue since May as investors gauge the extent of the slowdown in the world's second-largest economy.
While Baidu has sufficient cash to fund its US$1.9 billion acquisition of 91 Wireless as it seeks a greater share of the country's mobile-user market, the company went offshore for "tax-efficient" financing, Moody's Investors Service said in a report yesterday.
"The technology sector is considered more of a growth sector than a deep cyclical sector for China," said Michael Roche, an emerging-market strategist at broker-dealer Seaport Group.
"It's still a growing field, compared to, say, metals or real estate, where a company would have had a more difficult time fulfilling their funding needs, given the economic backdrop we have in China."
Baidu, rated A3 by Moody's, or four levels above junk, also sold five-year securities eight months ago in its debut offering, paying just 2.27 per cent, or 1.6 percentage points over US benchmarks.