Tencent holding back dollar bond pitch

Wednesday, April 14, 2021

Tencent Holdings (0700) is holding off marketing a planned dollar bond deal Wednesday, according to people familiar with the matter, as Asia credit markets have been roiled by the plunge in one of China’s biggest distressed-asset managers.

Tencent had intended to price a possible US$4 billion offering Wednesday, making it one of Asia’s biggest dollar-bond deals of 2021. The company is monitoring the market and hasn’t decided on the exact timing for the planned deal, said the people, asking not to be identified because they’re not authorized to speak publicly.

A Tencent spokesperson said by email that an announcement regarding its proposed notes will be made “when appropriate.”

It is striking that worries about the fate of China Huarong Asset Management Co. may have caused sufficient tumult to put Asia’s largest company by stock-market value in wait-and-see mode to sell debt. A Bloomberg Barclays index of Chinese investment-grade dollar bonds showed spreads jumped the most since March 2020 on Tuesday, and Huarong notes fell further Wednesday, with the yield on one nearing 40 percent.

Huarong “has caused some turbulence in the Chinese dollar bond market and made it harder for Chinese borrowers to navigate placement timing,” said Bloomberg Intelligence analyst Timothy Tan. “I think Tencent may want to see the market stabilize before pricing any bond since they can afford to be patient on raising funds.”

It’s been less than a year since Tencent’s most recent dollar-bond deal at US$6 billion, and the company in February raised US$8.3 billion in Asia’s biggest offshore syndicated loan for a Chinese firm since 2016. A new dollar bond would be rated four notches below AAA by the three major U.S. credit firms.

Not all potential Chinese debt issuers are sitting on the sidelines. Guotai Junan Holdings moved forward Wednesday with a dollar-bond offering, though credit traders said spreads on Asia high-grade debt reversed early moves to widen for what would be an eighth day. The spread for a Tencent 2030 dollar bond, one of the company’s most actively traded, reached its widest in nearly three months.