TMTPOST--Huawei Technologies Co., Ltd., a global leader in the information and communications technology (ICT) sector, has announced its plan to issue the first series of medium-term notes (MTNs) for 2024 after obtaining approval from relevant authorities.

This issuance adopts a centralized book-building, centralized placement, and designated account collection method. The Bank of China is the lead underwriter, while the Industrial and Commercial Bank of China and Shanghai Pudong Development Bank act as co-lead underwriters.

The subscription period runs from 9:00 am on July 12, 2024, to 6:00 pm on July 15, 2024. The bond has a ten-year term, with a total issuance size of 10 billion yuan, no minimum underwriting amount, a subscription range of 2.4% to 3.0%, annual interest payments, and principal repayment at maturity.

Since 2019, Huawei has frequently issued both short-term and medium-term bonds. Industry insiders suggest that after Huawei was sanctioned by the United States in 2019, it faced certain financial pressures and obstacles in overseas financing channels, making domestic bond issuance a reasonable choice.

With changes in the macroeconomic environment, Huawei has shifted its bond issuance focus to the domestic market. For instance, in 2024 alone, Huawei issued three short-term financing bonds from February to April, with terms ranging from 245 to 270 days and subscription ranges of 1.7%-2.3% or 1.9%-2.5%, totaling 90 billion yuan.

Currently, Huawei has 12 medium-term notes outstanding in the domestic market (excluding the current issuance), totaling 340 billion yuan, with the rest being short-term bonds, including the 90 billion yuan issued in 2024.

Huawei also has three outstanding overseas dollar bonds totaling 3.5 billion dollars, issued between 2015 and 2017, with ten-year terms. Additionally, Huawei also has a European MTN with a size of five billion euros, launched in 2017.

Huawei's bond issuance dates back to 2012, when it issued one-billion-yuan (three-year) Dim Sum bonds in the Hong Kong market at a 5.3% interest rate.

For a private company like Huawei, the bond market serves as a crucial financing channel, both domestically and internationally.

According to Huawei's financial reports, its net cash (cash and short-term investments minus total borrowings) from 2021 to 2023 was 241.2 billion yuan, 176.3 billion yuan, and 166.9 billion yuan, respectively. During the same period, its liabilities-to-assets ratio stood at 57.8%, 58.9%, and 59.8%.

Global giants often use bonds to optimize funding costs. For example, in 2023, Apple issued five batches of bonds, ranging from three-year to 30-year terms, totaling 5.25 billion dollars. At that time, Apple's cash reserves were a staggering 166.3 billion dollars, with the bond issuance proceeds for stock buybacks, dividend payments, working capital, capital expenditures, acquisitions, and repaying existing debt.

In the early years, Huawei explained that domestic bond issuance would open up the domestic bond market, further diversify financing channels, and optimize the overall financing channels. Huawei later stopped responding specifically to this matter.

In 2019, Huawei's founder Ren Zhengfei said that Huawei must issue bonds when the company is in its best condition to enhance public understanding and trust, rather than waiting until difficulties arise.

Besides, the cost of issuing bonds in good times is low, but if Huawei employees, who are also owners of the giant, continually invest in the company, the cost would be too high. In the past, Huawei mainly financed through Western banks, but since those channels have become less accessible, they decided to try financing through domestic banks, Ren noted.

Huawei is able to issue as many bonds as it hopes because the company has sufficient funds, he added.