Huawei’s Second Dollar-Denominated Bond Offering

On April 21, The Wall Street Jour­nal report­ed Huawei was prepar­ing to issue a 10-year, $2 bil­lion dol­lar-denom­i­nat­ed bond offer­ing.  The bond is the sec­ond of its kind after the com­pa­ny issued a $1 bil­lion bond almost exact­ly one year ago.  Although the com­pa­ny is best known for telecom­mu­ni­ca­tions infra­struc­ture, the offer­ing is report­ed­ly intend­ed to finance research and devel­op­ment relat­ed to its mobile divi­sion, which has expe­ri­enced explo­sive growth over the past few years.  In the smart­phone indus­try, Huawei holds 8% of the glob­al smart­phone mar­ket and, pri­mar­i­ly on the back of those sales, increased net prof­it by 32% last year.

As evi­denced by the first bond offer­ing being over­sub­scribed, investors are uncon­cerned with the company‘s ties to China‘s secu­ri­ty ser­vices and mil­i­tary.  Nor have they shown much con­cern that, in 2013, U.S. com­pa­nies were effec­tive­ly banned from pur­chas­ing telecom­mu­ni­ca­tions equip­ment from Huawei due to clear-cut nation­al secu­ri­ty con­cerns.  Past reports draw­ing have linked Ren Zhengfei, Huawei‘s founder and CEO, with both the People‘s Lib­er­a­tion Army and the Nation­al Con­gress of the Com­mu­nist Par­ty of Chi­na.  In addi­tion to Wash­ing­ton, India, South Korea, the Unit­ed King­dom and oth­ers have expressed con­cerns relat­ed to Huawei‘s involve­ment in espi­onage and have banned, or con­sid­ered ban­ning, gov­ern­ment use of their prod­ucts and ser­vices.

Like­ly man­agers of the bond offer­ing include DBS Bank, Aus­tralia and New Zealand Bank­ing Group, Stan­dard Char­tered Bank and Bank of Chi­na.  The offer­ing could be com­plet­ed as ear­ly as this month.