Tencent has raised approximately $4.6 billion through a dual-currency bond offering in US dollars and offshore yuan, as the Chinese tech giant continues to ramp up investments in various business sectors, UNN reports, citing Nikkei Asia.
Details
In a filing with the Hong Kong Stock Exchange on Wednesday, Tencent stated that the proceeds will be used for "general corporate purposes, including refinancing," meaning the company may use part of the funds to replace existing debt with more favorable rates and terms.
Tencent issued 11 billion yuan in 10-year bonds and 4 billion yuan in 30-year bonds (also known as "dim sum" bonds) with yields of 2.5% and 3.1%, respectively. The company also sold $1.75 billion in 10-year dollar bonds and $700 million in 20-year dollar bonds at rates just 50 and 60 basis points, respectively, above the yields of comparable Treasury bonds, as strong investor demand drove down bond yields.
According to a source familiar with the terms of the deal, during the book-building process, the offshore yuan tranches received investor orders totaling 43.4 billion yuan, while the two dollar tranches received $8.5 billion in orders. Most of the investors attracted by these bonds are from the Asia-Pacific region, the source added, while 25% of the investors for the 20-year dollar bonds are from the US.
The 10- and 30-year "dim sum" bonds are the largest of their kind ever issued by a Chinese company, the source said.
The dollar bonds represent Tencent's first such issuance since 2021, with trading set to begin next Tuesday. Upon completion of the bond placement, Tencent will have approximately $22.18 billion in bonds outstanding under its $30 billion global medium-term note program.
"We are pleased with the positive response to our bond offering amid a dynamic global market environment," said Martin Lau, President of Tencent. "The positive reaction demonstrates investor recognition of the high-quality growth of our core business lines and the benefits we derive from the implementation of AI."
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Tencent's new move to raise offshore debt comes as the company continues to increase investment in AI, attempting to stay ahead of ByteDance and Alibaba in the technological arms race, the publication writes. After US export controls curbed the company's chip spending plans for 2025, Tencent pledged to significantly increase AI investment this year, particularly in the second half of the year when more Chinese AI chips are expected to become available.
Although Tencent recorded its slowest revenue growth in six quarters during the first three months of the year, its capital expenditures for that period reached 31.9 billion yuan, up 63% from the previous quarter. Goldman Sachs expects Tencent's capital expenditures to reach 165 billion yuan in 2027, more than double the 2025 level.
The underwriters for the dollar bond placement include leading US banks such as JP Morgan, Morgan Stanley, BofA Securities, and Goldman Sachs.
The company plans to list the bonds on the Hong Kong Stock Exchange. The placement will be conducted via private placement and will not be offered to retail investors.
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