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* Loans: Tech giant takes advantage of strong liquidity tocomplete US$6.5bn financing
By Apple Lam
HONG KONG, Sept 6 (LPC) - Chinese tech giant TencentHoldings has completed its largest offshore loan as a US$6.5bnclub, taking advantage of strong demand for high-quality creditsto secure its cheapest syndicated loan to date.
Nine banks participated in the five-year financing, which issplit into a US$3.9bn bullet term loan and a US$2.6bn revolvingcredit facility. Chinese banks dominated the deal, accountingfor US$5bn of the total.
Tencent’s journey in the loan markets mirrors that ofChinese e-commerce giant Alibaba Group, which rapidly became afamiliar name with Asian lenders and took bigger and tighterpriced financings.
“For names like Tencent and Alibaba, credit quality is not aproblem. The big banks are particularly willing to continue tolend to these companies despite the increasingly low pricing,” abanker involved in the latest Tencent financing said.
Like Alibaba, which completed its debut loan in 2012,Tencent has made significant progress since its first loansigned in May 2014 – a puny US$200m five-year facility that paida top-level all-in of 159bp based on a margin of 151bp overLibor.
FAMILIAR GAME
The two giants have been flagbearers for the wave of Chineseoffshore loans completed in recent years, raising nearly US$45bncombined since 2012. Alibaba’s share of that flow is US$26.15bn,while Tencent has accounted for US$18.24bn in the past fiveyears.
The duo has also been prolific in the international bondmarkets. In early April, Tencent raised US$6bn through afive-tranche bond that attracted US$27bn of orders. Tencent’sbond is the largest US dollar offering from an Asian borrowerthis year.
Bond investors haven’t had a taste of Alibaba since December2017 when the company raised US$7bn through a multi-trancheoffering that attracted orders of US$40bn.
Riding on the duo’s success, other Chinese new-economycompanies, including the likes of search engine Baidu,e-commerce giant JD.com and smartphone maker Xiaomi, havesuccessfully made loan market forays.
Offshore loan volumes from China’s technology companies haveskyrocketed to a record US$16.51bn already year-to-date,compared with a mere US$1bn raised in the whole of 2018. Thathas helped boost China offshore volumes to US$91.82bn, alreadysurpassing last year's US$78.5bn total.
This year’s flow has also seen debut borrowers such as realestate portal Ke.com, in which Tencent is an investor, andBeijing Bytedance Technology, which counts Japanese technologybehemoth SoftBank Corp as one of its investors.
GRINDING TIGHTER
On its latest foray, Tencent paid an all-in pricing of 85bpbased on an interest margin of 80bp over Libor – the lowest loanpricing it has achieved so far. Tencent’s previous loan was inMarch 2017 when it raised US$2bn through a five-year bullet loanfrom a dozen lenders, paying a top-level all-in of 115bp basedon a margin of 95bp over Libor.
The same year in May, Alibaba closed a US$5.15bn five-yearbullet deal with 13 banks, paying an all-in slightly north of100bp via the same margin as Tencent’s deal.
This year Alibaba completed an amendment-and-extension ofits US$4bn five-year bullet term loan signed in 2016, cuttingthe margin to 85bp over Libor from 110bp and extending the tenorby a further five years.
Despite the reduced pricing, 30 banks joined the A&Eexercise, an increase from 25 lenders including the eightoriginal mandated lead arrangers and bookrunners when the loanwas syndicated in 2016.
The strong response from lenders for both credits is hardlysurprising. Both Alibaba and Tencent are rated A1/A+/A+(Moody’s/S&P/Fitch) and present attractive lending propositionsgiven their dominance of the tech landscape in China.
In 2018, Tencent’s revenues and net profits totalledRmb312.7bn (US$43.75bn) and Rmb80bn, respectively, while Alibabaclocked respective figures of Rmb376.8bn and Rmb80.23bn.
Between the two, Alibaba holds the distinction for thelarger loan – a US$8bn three-tranche borrowing in July 2013 thatpaid top-level blended all-in of 314bp based on margins of 225bpand 275bp over Libor and remaining average lives of 2.83 yearsand 4.11 years respectively.(Reporting By Apple Lam; editing by Prakash Chakravarti and ChrisMangham)
