Oct 24, 2019 06:00 AM

Huawei’s First On-Shore Bonds Generate Heated Demand

Huawei Technologies prices its first on-shore bonds at a rate of 3.48%. Photo: VCG
Huawei Technologies prices its first on-shore bonds at a rate of 3.48%. Photo: VCG

Huawei Technologies’ first 6 billion yuan ($850 million) of domestic bond sales received an enthusiastic response from investors.

The Chinese telecom equipment giant Wednesday completed the bond offering at a coupon rate of 3.48%, with a three-fold oversubscription. The coupon rate was in line with market expectation, equivalent to rates for large state-owned issuers, a bond investment manager told Caixin.

It was the first time for Huawei to tap the on-shore bond market and its first issuance since March 2017. Previously, the company issued four dollar-based bonds and two yuan-dominated bonds in Hong Kong through subsidiaries.

Shen Bin, assistant general manager of the asset management department of Pacific Securities, correctly predicted a rate range between 3.4% and 3.5%. That put Huawei’s bonds on a par with recent offerings by state-owned energy giants such as China National Petroleum Corp. (CNPC) and China Southern Power Grid Co.

China Southern Power Grid Wednesday issued bonds at a coupon rate of 3.59%, 11 basis points higher than Huawei’s. A basis point is a hundredth of a percentage point. CNPC also issued some bonds Wednesday at a rate of 3.48%.

Huawei’s bonds could command a rate even lower than that of some big state-owned companies, showing the market’s recognition of its performance, Shen told Caixin.

The 3.08 times oversubscription also showed investors’ enthusiasm, reflecting strong demand from investors including banks and mutual funds. Usually a 2.0 times oversubscription is good for bond sales, a bond investment manager said.

Huawei’s bond offering carried an underwriting fee of less than 0.2%, holding its total financing costs below 4%, Caixin learned. Commenting on the bond sales plan last month, Huawei founder and Chief Executive Ren Zhengfei acknowledged that on-shore financing is relatively cheaper with an interest rate of about 4%.

Huawei previously obtained financing mostly from Western banks, but now access has increasingly become restrained, Ren said, adding that the company has ample funds and has no problem repaying debts.

As of the end of June, Huawei had a total of 249.7 billion yuan of cash on hand, bank deposits and other-currency funds, up 35.7% from the end of 2018, according to the prospectus.

By the end of June, Huawei’s total debt-to-assets ratio was 65.2%, with outstanding interest-bearing debt of 96.4 billion yuan, according to the prospectus.

Proceeds from the bond sales will be used to replenish working capital and invest in core businesses, Huawei said.

China Lianhe Credit Rating Co. Ltd. gave the top AAA rating to the bonds and to Huawei as an issuer.

Contact reporter Denise Jia (

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