Xiaomi to Raise $600 Million in First Offshore Dollar Bond Issuance

Chinese smartphone-maker Xiaomi Corp. on Wednesday signed an agreement to raise $600 million through a dollar bond issuance program, weeks after the company raised 1 billion yuan ($141 million) with a bond program at home.

The money raised will mainly be used for “general corporate purposes” and “to repay existing borrowings,” Xiaomi said in statement filed to the Hong Kong Stock Exchange. The bonds will have an interest rate of 3.375% and will mature in April 2030.

The bonds were 8.5 times oversubscribed, pushing the total value of order bookings to $5.1 billion, Xiaomi said in a separate statement sent to Caixin.

This is the first time Xiaomi has issued offshore bonds denominated in a foreign currency. Early this month, Xiaomi signed contracts to raise 1 billion yuan through a yuan bond-issuance program in China.

Xiaomi’s increasing efforts to raise capital come as its performance weakens in the domestic market, where its smartphone sales have plummeted over the past two years.

Xiaomi’s latest dollar bonds were given BBB- rating by ratings agency S&P Global, the lowest investment grade it gives to bonds. Anything lower is considered junk. In a note on Monday, S&P said that this was based on its prediction Xiaomi’s profits will narrow in 2020 and 2021 due to the generally sluggish smartphone market and the impact of the novel coronavirus pandemic.

However, S&P did say that Xiaomi has “minimal debt leverage,” a “decent share” in the global smartphone market and its internet of things business is developing well.

As of the end of last year, Xiaomi had cash and cash equivalents of 25.9 billion yuan, total assets of 183.6 billion yuan and debt of 101.97 billion yuan, according to the company’s 2019 earnings report.

This year is expected to be tough for smartphone-makers in general due to the pandemic, which is set to exacerbate a decline in sales over the past few years in the highly saturated market. Smartphone shipments in China are expected to drop 11.9% in 2020, according to industry consultancy Canalys. In the worst-case scenario, sales could fall by more than one-fifth.

Contact reporter Mo Yelin (yelinmo@caixin.com)